Carbon tariffs: an instrument for tackling climate change?: AXA

Carbon Tariffs: Another Name for Green Protectionism?

A Carbon Tariff model that might be acceptable to developing countries

Carbon tariffs are a tax on carbon-intensive imports, which recently triggered heated international debates. Certain industrialized countries have been advocating the adoption of carbon tariffs on products imported from developing countries, such as China. 

According to Marco Springmann, a physicist turned economist, the main reason is that certain rich nations have implemented binding targets to reduce greenhouse gas emissions, while poorer countries have so far resisted legal commitments. Additionally, because many of them simply do not set a price on carbon, they can produce cheaper carbon-intensive goods. Promoters of carbon tariffs thus think that taxing such goods at the border will make up for this difference in price and indirectly regulate the associated emissions.

However, almost a quarter of China’s CO2 emissions come from its

exports. So China and other nations view carbon tariffs as trade sanctions and protectionism. They even threatened to start a “trade war” if such schemes were to be put into place. They stress the role that carbon emissions have played in the industrialization of advanced economies and demand increased financial aid in order to reduce their emissions.

Carbon tariffs to finance clean development

To avoid this coming carbon war, Springmann proposes to recycle the tax revenues from carbon tariffs (claimed in the importing country) to the exporting country as investments in climate change mitigation and adaptation measures. This coupled scheme addresses the concerns about competitiveness and reducing emissions in one part of the world and economic progress in the other. Since it acknowledges the demand for imports as an emissions-causing factor, it may therefore represent a consensus solution within a global climate policy. According to Springmann, a preliminary assessment has indicated that the revenue from this scheme would range between $8 and $50 billion per year, depending on the price of carbon. In comparison, at the climate summit in Copenhagen in 2009, it was agreed to create a “Fast Start Fund” to support climate adaptation and clean technology in developing countries. The pledged contribution is $30 billion over the next three years. Carbon tariffs would add significant revenue streams to this effort."

Go to original AXA article by Marco Springmann (3 years)


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