Obama vs. Krugman: Five Reasons the President's Right on Carbon Tariffs
As congressional efforts to regulate U.S. carbon emissions gain steam, carbon tariffs have received a good deal of attention thanks in part to economist and New York Times columnist Paul Krugman.
Mr. Krugman has become a proponent of carbon tariffs, also known as "border adjustment measures," which would tax imports into the United States from countries which have not taken sufficient steps to combat climate change. In his most recent New York Times blog post, he writes that President Obama is "getting it wrong" by expressing skepticism of carbon tariffs and that French President Sarkozy is "entirely reasonable on the subject."
While Mr. Krugman is correct to note that global trade rules may permit the use of carbon tariffs, he fails to provide the economic, environmental and diplomatic contexts that have led President Obama to conclude that, in order to create a level playing field for American manufacturers, "there may be other ways of doing it than with a tariff approach." Here are five reasons why President Obama is right to oppose carbon tariffs:
1. Carbon tariffs are unlikely to advance U.S. environmental goals. A carbon tariff is a blunt instrument which is likely to result in the same tariff being applied to products from both clean and dirty producers in a country such as China or India. As a result, carbon tariffs are unlikely to incentivize the kind of innovation or energy efficiency improvements by foreign companies that will lead to a reduction in global carbon emissions. At the same time, threats by the United States to impose new green tariffs are likely to cause serious diplomatic frictions that will make it more difficult for the Obama Administration to negotiate effectively for a global deal on climate change.
2. Carbon tariffs could ignite a green trade war and harm the U.S. economy. China and India have called U.S. proposals for a carbon tariff unacceptable and protectionist and have hinted at retaliation. Developing countries have pointed to U.S. per capita CO2 emissions, which are dramatically higher than the world average, as a basis for retaliating against any U.S. efforts to place tariffs on foreign goods. As President Obama noted, "we have to be very careful about sending any protectionist signals out there," particularly while the world continues to deal with the ongoing recession. Sparking a trade war is no way to help the U.S. economy.
3. Carbon tariffs are likely to violate global trade rules. While Mr. Krugman correctly notes that global rules provide for the use of trade measures to address environmental issues, they also require that "a connection must be established between the stated goal of the climate change policy and the border measure at issue" and that "the measure must not constitute a means of arbitrary or unjustifiable discrimination" or a "disguised restriction on international trade." It turns out that it is difficult to design a border measure in a way that satisfies these criteria, particularly when you leave it to politicians. As Jeffrey Frankel of Harvard University has written, "border measures to address leakage need not necessarily violate the WTO or sensible trade principles, but there is a very great danger that in practice they will."
4. Other countries are likely to use carbon tariffs against the United States. Mr. Krugman may think that French President Sarkozy is "entirely reasonable" to call for a European carbon tariff, but he fails to note that the French have implied that they might turn around and use it on the United States, as a group of House Democrats warned in a letter to congressional leaders over the summer. "The U.S.," the Members wrote, "must not provide a template to ignite a global trade war."
5. There are less-controversial ways to help U.S. manufacturers transition to a clean energy economy. The European Union and other major developed countries thus far have relied on giving away credits for free to energy-intensive industries that are hit hardest by climate policies. U.S. legislation would provide similar assistance to domestic manufacturing industries including steel, aluminum, cement and chemicals. As President Obama suggested after the House voted on its climate legislation, "there were a number of provisions that were already in place...to provide transitional assistance to heavy manufacturers." He raised the possibility that carbon tariffs are unnecessary, "given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries."
I'm all for not "fetishizing free trade" as Mr. Krugman suggests, but it is often those who are most opposed to open markets who are most hyperbolic about the supposed effects of trade. The United States imposes all sorts of regulations which lead to higher costs relative to other countries, from other environmental regulations to minimum wage requirements and prohibitions on bribery and corruption. The fact that U.S. anticorruption regulations are more stringent than Russia's has not led American businesses to abandon Minnesota for Moscow.
Neither is a U.S. cap-and-trade program likely to cause the kind of "carbon leakage" -- the movement of production from the United States to countries which do not have similar regulations -- that proponents of carbon tariffs warn. In fact, studies of Europe's carbon regulation system suggest that carbon leakage is "unlikely to be substantial" because of factors like transportation costs and differentiation between local markets.
Certain U.S. manufacturing sectors may face a decline in production, but Eileen Claussen, President of the Pew Center on Global Climate Change, points out,
most of the projected decline in production stems from a reduction in domestic demand for these products, not an increase in imports. In other words, most of the projected economic impact on energy-intensive industries reflects a move toward less emissions-intensive products -- as would be expected from any effective climate change policy, even one with global participation -- and not a movement of jobs and production overseas.
President Obama and Congress must make sure that U.S. climate policy efforts encourage other countries to reduce their carbon emissions and spur global demand for U.S. clean energy technologies, which will help to create a new generation of green jobs in the United States. Carbon tariffs are unlikely to advance either urgent priority.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
The existing Carbon Trading market just crashed!
ACES is a bankster bill, it give the most money to the electric source that is the MAIN cause of CO2 levels: COAL.
1$ per ton Carbon TAX.
any coverage on the green peace action going on in the Tar Sands right now?????
Goldman Executive Named as Obama Adviser
President Obama said he would nominate Robert Hormats, a vice chairman of Goldman Sachs
International, to a top economic position at the State Department.
The global warming scam passed by Congress. Goldman Sachs is in the middle of it, as usual– a potential trillion dollar sure thing.
And Former Vice President Al Gore who will profit from the cap-and-trade plan through his company, Generation Investment Management,–
Gore is joined by three former Goldman Sachs heads in their carbon offsets business.
Goldman Sachs to be carbon regulator?
So does this mean that freebooting Goldman Sachs could be the de facto regulator of the carbon market?
As the global warming bubble inflates and then bursts, will Goldman
Sachs self-regulate all the way to the bank… making record profits at the expense and misery of taxpayers and consumers
fact that the Democratic party is but one arm of the two party/same corporate master system of government.
We need to face the fact that Democrats aren't there to do the will of the people,
but rather the will of their corporate masters. Thus, despite having unprecedented power, little if anything of true substance is going to be achieved.
This is why Al Gore is so anxious for Congress to pass cap&trade. In particular, he argues that the debate is over, and no further study is needed. 'Hurry up!'
Al Gore knows that the longer the debate drags on, the wave of new scientific studies which rebut agw claims will grow and possibly (probably?) discourage Congress from enacting the pending climate bill. If cap&trade fails, Gore will lose a fortune. He has kept this information quiet, although it is all available on the web. Meanwhile, he has been encouraging thousands of Americans to petition Congress to pass the bill. They think they are saving the planet. All they are saving, really, is Al Gore's personal fortune.
One bizarre consequence of cap & trade involves a Chinese dam. The owners did not build the dam for any reason related to global warming. However, they were told that because the dam generated so little CO2, they would be granted excess carbon credits under the European system.
The Chinese quickly sold these credits to Germany's largest utility which emits substantial amounts of CO2. These credits allowed the utility to continue to generate large amounts of CO2.
I agree with everything you say about Goldman Sachs and Al Gore. Goldman helped Gore set up his company to manage investments in CO2 credits, and has invested in the company itself. The COO of Gore's company was formerly the chief investment officer for Goldman. Gore's company has also invested in a European company that designs systems which emit low carbon counts, thereby allowing the owner to generate excess emission credits. The owner of the low CO2 emission facility can then sell the excess credits. How? By trading them through a broker. Which one? Gore's company, for starters. Beyond this arrangement, Gore has personally bought into a venture capitalist firm that has invested in a software start-up which has designed proprietary software for precisely measuring CO2 emissions. This way, emitters can be forewarned that they are exceeding their limits so they can go to Gore and buy carbon credits. Or, a company could determine that it was accumulating unneeded credits and go to Gore's company to sell them.
My second post below should be read first.
I mean second post above.
Wrong. If the goal is to reduce CO2 emissions, a straight tax is better. If the goal is to reduce pollution, same answer. Regardless of whether you believe in global warming caused by man-made CO2, Cap and Trade costs much and delivers nothing:
"Obama Admin: Cap And Trade Could Cost Families $1,761 A Year"
http://www
And if Waxman/Markey were fully enacted, even according to IPCC projections the net temperature reduction by 2050 would be a measly 0.05 degrees:
http://mas
Sounds like a heck of a deal. No wonder it's been put on the back burner?
On the other hand a straight tax on fossil fuels, with the revenues going directly to build up clean energy infrastructure, might actually accomplish something.
Cap and Trade is a complex scheme to do accomplish what a REAL solution would look like- a carbon tax.
The only difference is that instead of our government getting the money, and being able to penalize crooks for tax evasion, it sets up a free-market "piratization" scheme which lets fraudsters like Goldman Sachs make billions off it, doesn't penalize polluters, and doesn't make sure the tiny penalties polluters pay goes into funding further government oversight.
In other words, it's a non-solution only a conservative could love. Which isn't surprising, because Cap-and-Trade is a conservative created program anyway.
It is pretty obvious that when you let China produce items without any limit on the resulting carbon emissions, while US producers have to pay a carbon tax for producing the same items that China will then have an unfair advantage if the Chines products are imported without any carbon tariff. The article dances around that, never suggesting a practical remedy.
Is this the Wall-Mart lobby speaking? Prof. Krugman is not a lobbyist and a highly regarded economist; I believe his ideas merit a less disdainful response.
Tariffs is a big discussion. Tariffs are generally a bad idea, since the reduce world trade. But there is a place for limited tariffs to counter unfair competition, hopefully temporary.
The ACES Largest Derivatives Market Bankers bill in history, must be scrapped.
A 1$ per ton carbon tax is fair, clear and unavoidable.
Plow that money into rooftop solar installations and waste BioChar.
But till then, we have no right to impose carbon Tariffs on other nations.
Obama is pushing for dirty coal electric plants he isnt green.
The elite love polluting us with lead and mercury emissions.
And they spray us with barium in the chemtrails.
You must be logged in to comment. Log in or connect with
