Azara Blog: A proposal to introduce an arbitrary inter-country carbon tax

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Date published: 2007/04/08

John Hontelez, representing some organisation called the European Environmental Bureau, says on the BBC:

With rapidly mounting signs that carbon dioxide emissions cause global warming, how should we deal with countries which haven't ratified the Kyoto Protocol and don't impose a "carbon charge" on their exports?

These countries unfairly favour their own goods and discriminate against nations that do apply such a charge, as the European Union is doing with its Emissions Trading Scheme, and some of its members with carbon taxes.

Can we rebalance the economic burden of shifting to a low-carbon society?

Border Tax Adjustments (BTAs) might be the answer which allows the EU to develop responsible climate policies without having to wait for other countries.

They would result in products imported from the US being taxed to compensate for resulting differences in production costs. Thus EU firms would be protected against unfair, carbon-careless competition from outside.

BTAs can redress the balance between, say, EU companies that pay for their CO2 emissions, and companies from the USA which do not because the White House won't take climate change seriously.

Sure, this sounds like a fair enough idea. Only why stop at carbon emissions, why not tax imports from companies that pollute the water, etc. Of course the big problem is that many products consist of sub-products from other companies and countries, so it is extremely difficult to do the sums properly (and taxing something at double the rate it should be is no better than not taxing it at all). Needless to say, the one underlying principle underlying this tax is that it should be fair, in particular the (unit) rate should be the same for all carbon emissions, independent of source. But no, Hontelez doesn't want to do that, instead his proposal is just anti-American political grandstanding:

There are several important aspects regarding border taxes.

It's clear the tax shouldn't apply to imports from poor countries with low per-capita carbon emissions; the real onus is on countries with major responsibility for climate change which refuse to take necessary measures.

At present, this list shouldn't include China, which as a developing country has a relatively low emissions-to-population ratio.

A "Kyoto tax" shouldn't be abused to respond to low labour costs in other countries.

However, exempting specific US states from a BTA targeting that nation, if technically feasible, would be great, as it would pressure the rest of the US to fall in line.

So Hontelez, and by association the European Environmental Bureau, cannot be treated seriously. He just wants to introduce an arbitrary tax. He is just taking the piss.

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