EU to Consider Climate Tariff?

According to this report, the European Union may consider adopting a "border tax adjustment" on imports from countries that do not impose domestic caps on carbon dioxide emissions. The idea is to reduce some of the costs of the EU's emission trading scheme. Set aside that parts of the EU itself are themselves behind schedule on the emission reductions to which they've already committed, such a proposal could be very attractive to domestic industries that would like tariff "protection" from foreign competition.

Related Posts (on one page):

  1. EU to Consider Climate Tariff?
  2. Many Countries Off-Course for Kyoto:
Ron Hardin (mail) (www):
It has the opposite effect on costs - the residents of the country in question just can't escape paying it, and so pay more.

The hope is to provoke a trade war, whose settlement will somehow come to include kyoto limits. A trade war, hurting both sides where only one was hurt before, is leverage.
10.11.2006 10:02am
AppSocRes (mail):
Kyoto was the EU's last attempt to hobble the American economy. This is their latest. By US standards, the EU is an economic disaster area. Rather than correct the problems that are crippling their own economies, EU politicians hope that they can somehow drag the US economy down and end up looking better in comparison. Of course, they are also hoping that the US November elections may produce a Congress that will do their work for them.
10.11.2006 10:29am
10.11.2006 10:35am
thedaddy (mail):
environmentalism = socialism = a race to the bottom and distaster.

10.11.2006 10:41am
Buck Turgidson (mail):
uh... this is not a "climate tariff"--it's a technology utility tariff. If you encourage investments in emission-limiting technology, you are not taxed. If you don't encourage it, you pay. It's the same for inverse subsidy tariffs--if your goods are subsidized by the government, you pay a tariff, if they are not, you don't. In a sense, subsidies are negative investments on the part of the manufacturer/grower (that is, they are reaping benefits of receiving money--negative investment--instead of spending it--normal investment--which is why they are taxed).
10.11.2006 12:23pm

uh... this is not a "climate tariff"--it's a technology utility tariff.

Newspeak strikes again.
10.11.2006 12:35pm
JunkYardLawDog (mail):
A tarriff by any other name, would still stink of protectionism and work to harm not help the people of the country who imposes same.

Socialist thought... in the name of helping you our people we will make competing goods more expensive and protect your companies from having to develop more efficient more productive and less costly methods of production.

This idea would be against China and India as much as against the USA.

Says the "Dog"
10.11.2006 1:03pm
wto lawyer:
This would likely violate WTO rules and lead to a challenge by many of the EU's trading partners. For that reason, I doubt the Commission would sign off on it.
10.11.2006 3:20pm
Ming the Merciless Siamese Cat (mail):
So, because the Chinese government fails to impose emission caps, Helmut in Munich should pay higher prices for consumer goods?
10.11.2006 4:42pm
Andreas O'Keeffe (mail):
I like it.

Assuming that the tariff is (somewhat) accurate an assesment of environmental costs then this seems to be effective at accomplishing two things. 1)Leveling the playing field, 2) compensating for producers who externalize production costs. They are two sides of the same coin. By imposing the tariff, it at least forces consumers to internalize the environmental costs of products whether A) produced clean thus at a higher production cost or B) produced dirty at a lower production cost + some environmental cost. Thus the consumer can then make a rational economic decision and this is a way of leveling the playing field in REAL terms, (as opposed to domestic favoritism) which i oppose.
10.11.2006 8:58pm
JunkYardLawDog (mail):
Andreas, you say you oppose domestic favoritism, but in the same breath you express support for a tax designed to favor EU domestic businesses from competition from non-EU businesses????

What this tax would do would force EU consumers to subsidize through higher prices the EU businesses that can't compete against non-EU businesses on the basis of productivity, costs, and value.

Finally, there is no global warming cost because there is no man made global warming.

Says the "Dog"
10.11.2006 9:11pm
Andreas O'Keeffe (mail):

You conflate domestic favoritism with having a truly level playing field. All though I have little specific knowledge about the particular proposal, I think its a good idea to have the market internalize environmental costs. But regardless of whether one thinks internalizing such costs is a good idea, the EU has every right to call that ball for better or worse.

To the extent that they do, forcing the market to internalize environmental costs by imposing tariffs on the back end for less "clean" foreign goods is no different than forcing domestic (meaning internal to the EU in this case) companies to bear environmental costs on the front end. At least its certainly no worse. The foreign businesses still dont have to internalize the costs of thier conduct, the consumer does; meanwhile the domestic business are fully internalizing such costs. (At a high level of generality, it shouldnt matter as long as the consumer is making rational choices but rationality does not trickle down quite so easy).

Of course, the crucial premise is that environmental costs do exist. I think this to be irrefutable. Whether there is economic global warming cost is less clear all though I think that the evidence weighs significantly more in favor of human-induced global warming than against it. Of course it is hard to tell when dealing with cyclical climate change but its not like we can go back to the drawing board if we get it wrong.

In a critical sense, the consumer is forced to subsidize nothing. Once the EU makes the decision that clean products are better than unclean products (which is within thier right) then the consumer is merely making an economically informed choice. If the tariff were a perfect reflection of what it seeks to achieve then there would be ZERO subsidation on measures of "productivity, costs, and value." Those variables would be unaffected by the tariff.

For example, lets say shoes produced by kids in China are also produced in a environmentally harmful way. Meanwhile EU shoes are produced by an adequately paid workforce in a environmentally compliant manner. We can break it down like this.

Base Cost of Shoe Production - 1
Cost of adequately paid adult workforce - 1
Cost of environmental compliance - 1

The Chinese shoe, if you will, Comes to the EU with a price of 1 (we will assume away profit and other markups for this purpose). The EU imports the shoe and approximating the environmental harm that results from unclean product, taxes it an additional 1. Net price of shoe: 2

Meanwhile, the EU shoe is subject to all 3 costs and has a Net Price of 3.

Any time either side can be more productive, that will translate through to the market. Increased Productivity in other areas shouldn't be undermined by an environmental tariff. If you can save money producing the shoe by hiring kids or even generally being more efficient, that will (ideally speaking) translate into the bottom line.

Likewise with value. Of course, the built in premise in the tariff is that there is a baseline value choice on a EU-wide level that environmentally sound shoes are better value (or at least of equal post-tariff value to unsound shoes). Again, this decision is an EU prerogative.

So, basically the ideal tariff would hold constant the environmental variable. Whether costs of compliance (~cost of harms) are internalized at the front or back end wont matter. All other variables, such as productivity, value, other costs, etc. fluctuate freely with competition and no subsidation occurs. In fact quite the contrary, with environmentally unsound goods, the relevant community (global or EU wide in this case) is otherwise subsidizing the profits of the unclean producer. The community at large is forced to bear the cost of production of the good while the producer reaps all the reward.
10.12.2006 2:12am
JunkYardLawDog (mail):

If the tariff were a perfect reflection of what it seeks to achieve then there would be ZERO subsidation on measures of "productivity, costs, and value." Those variables would be unaffected by the tariff.

Politicians making political not economic decisions (and that's exactly what this "environmental tax" is in fact) are never perfect. The condition will NEVER be satisfied. Since the existence of these costs is highly questionable and their measurement and dollar quantification subject to such large variability, the above condition sounds nice in theory, but like man made global warming will never exist or be satisfied in reality.

Further, this is nothing but an import tarriff disguised with a fancy name. That's all it is. The EU doesn't meet any of the Kyoto targets it promised to meet. The EU nations signed the treaty and then fail to adhere to it. Then they want an import tarriff to tax the goods of other countries who didn't sign the tarriff and didn't adhere to it. The fact is there is no difference between the EU countries and the non-kyoto signing countries because all such countries do NOT meet kyoto targets.

What's the environmental argument for applying this tarriff to non-EU countries who are NOT subject to kyoto targets like China and India?? Kyoto exempts these countries so they have by kyoto definition fully internalized any applicable environmental costs according to Kyoto.

By the same logic you offer for these highly suspect environmental costs the EU government would be fully justified to place import taxes on non-EU goods produced in countries with lower average wages than the EU, or produced in countries without the EU vacation and no fire once hired policies for lazy, incompetent, and inefficient workers. Certainly the EU could make the political decision that these other types of "costs" that are internalized by EU businesses and not by competing businesses from non-EU countries should be leveled on the playing field through increased import taxes. The argument for this is exactly the same and just as applicable as your environmental costs internalization arguments.

The bottom line is to cut through all the high sounding rationalizations for import taxes to protect/favor domestic production and domestic inefficiencies and recognize that whether you call it an environmental tariff or a we are inefficient producers tarriff or a we want the world to adopt our labor policies, pay scales, vacation polities, and no fire once hired policies tarriff that they are all nothing more than just a run of the mill import tax to protect domestic industries.

If the "PEOPLE" of the EU want to pay the added costs for kyoto signer (but not kyoto complier) produced goods versus non-kyoto signer (and non kyoto complier) produced goods they are free to so do without a "wild ass guess" (guess as to the amount of tariff imposed) import tariff imposed by corrupt politicians seeking to protect inefficient domestic corporations and inefficient corrupt labor union practices.

If the "PEOPLE" of the EU valued these environmental matters they would freely vote with their purchases to pay them. If they don't voluntarily choose to pay these costs then the people don't value these costs and the taxes are merely the dictates of a corrupt unsupported by the people political structure.

At least recognize your support for this import tax is based solely on the fact that *you* value it and *you* would like to see *your* values imposed by law upon those who don't agree with you. Makes you sound like an islamic fundametalist seeking to impose economic sharia law, so to speak, on the infidel unbelievers.

The impact of such an import tax as with all import taxes is to protect/favor domestic corporations and labor unions from global competition, an ultimate loss of jobs, competitiveness, and GDP output as a result of the continued inefficiencies built up in the inefficient and corrupt tariff imposing states over time. The "people" of such tariff imposing states bear the costs of these unsound political/economic decisions through higher prices, loss of freedom through greater government control of their lives and the product/price choices available to them, ultimately through loss of available jobs as the protected industries will ultimately fail in a more spectacular and harmful way than would have been necessary without the import taxes.

Says the "Dog"
10.12.2006 12:42pm
Andreas O'Keeffe (mail):
Personally I do value it. However I would fully support the opposite outcome. Not my choice to make.

There is a critical difference with environmental vs. other forms of import tariffs (this applies to regulation generally). The reason such a measure may be necessary is because with environmental issues, the time horizon for a feedback cycle is too long. This is not the case with many or any other types of issues. If kids are making shoes in China, they are making them now, and (if you are inclined to think so) they are suffering the harm now. Thus there is immediate consequence to decisions on such matters, the environment is quite different.
10.13.2006 5:32pm