Carbon Tariffs

[SS-18 ICBM]

Carbon taxes is a wonderful idea!

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And I'm against carbon tariffs for many of the same reasons that I'm against most forms of protectionism. In any case, it is likely that any such tariffs would not pass WTO rules.

But wouldn't carbon taxes require carbon tariffs? If only domestic products get taxed for carbon emissions, foreign products would be much, much more competitive. This could encourage an expansion in imports that wouldn't be possible before carbon taxes. I like free trade, but I do recognize that such trade causes pollution itself.

 

[RalofTyr]

I don't see how punishing consumers with higher prices and ultimately punishing developing countries for the mistakes the West had made during the industrial revolution will solve anything.

What carbon tariffs would do is prevent developing countries from reaching a standard of living.

I bet that if Carbon Tariffs do catch on, the West will make a fortune selling Eco-Friendly factories to poverty stricken nations wishing to compete with the West's new restriction on trade. Carbon Tariffs will be just another way the West exploits the third world.

 

[lovett]

But wouldn't carbon taxes require carbon tariffs? If only domestic products get taxed for carbon emissions, foreign products would be much, much more competitive. This could encourage an expansion in imports that wouldn't be possible before carbon taxes. I like free trade, but I do recognize that such trade causes pollution itself.

More then that, said expansion of imports means that no quantitative reduction in carbon emissions occurs. Those emissions are merely outsourced. This doesn't help us (or the world) one iota.

 

[El_Machinae]

I don't see how punishing consumers with higher prices and ultimately punishing developing countries for the mistakes the West had made during the industrial revolution will solve anything.

What carbon tariffs would do is prevent developing countries from reaching a standard of living.

I bet that if Carbon Tariffs do catch on, the West will make a fortune selling Eco-Friendly factories to poverty stricken nations wishing to compete with the West's new restriction on trade. Carbon Tariffs will be just another way the West exploits the third world.

This is why I think there should be carbon trading between nations. Each nation must account for the net carbon it emits, and then purchase offsets from other nations. The nations that have not polluted to date are given pollution credits that they may sell, while nations that have already polluted have a carbon debt that they need to mitigate.

 

[Kerozine]

But wouldn't carbon taxes require carbon tariffs? If only domestic products get taxed for carbon emissions, foreign products would be much, much more competitive. This could encourage an expansion in imports that wouldn't be possible before carbon taxes. I like free trade, but I do recognize that such trade causes pollution itself.

I'm confused; imported products are also be subject to the same consumption taxes as their domestic counterparts, no?

In this case, a carbon tariff would mean that imported products are doubly taxed, which means protectionism..

 

[SS-18 ICBM]

I don't see how punishing consumers with higher prices and ultimately punishing developing countries for the mistakes the West had made during the industrial revolution will solve anything.

Well, sometimes consumers are wasteful and don't heed their impact on the environment. I often see people wasting food that takes a lot of resources to create and distribute. I think it is important that we remind developing countries not to do the same mistakes we do.

In this case, a carbon tariff would mean that imported products are doubly taxed, which means protectionism..

I suppose carbon tariffs wouldn't be required if the exporting nation also has carbon taxes.

 

[Integral]

But wouldn't carbon taxes require carbon tariffs? If only domestic products get taxed for carbon emissions, foreign products would be much, much more competitive. This could encourage an expansion in imports that wouldn't be possible before carbon taxes. I like free trade, but I do recognize that such trade causes pollution itself.

A lot depends on whether we consider 'ideal' carbon tariffs or carbon tariffs as they are likely to be implemented. Ideally, it's a second-best solution where the first-best would be coordinated policy action (a global cap-and-trade or global carbon tax). As a practical matter, I'd love to see how badly Congress would screw up a carbon-weighted tariff policy. And I'd love to see how the Chinese react. I'm more against it on practical grounds than theoretical.

Back to the OP questions:

What would be the potential effects of this tax? Would it severely hamper international trade without any significant benefits? Or would it force those countries to implement ways to lower emissions?

First-order, putting a carbon tax on domestic firms has similar international effects as a quota on foreign goods*, in the sense that foreign firms can extract profit from the cost differential between foreign and domestic production. With a carbon tariff, if properly implemented, those profits can be 'captured' by the domestic government. It would hamper international trade to the extent that additional costs always reduce trade. That can be good or bad depending on if you are more worried about the economic gains from trade or the potential environmental damage from trade.

Would it force those countries to lower emissions? Indirectly, and only to the extent that said country's economy is export-driven.


*Ok, that was a bit obscure. In basic micro, you probably learned about tariffs and quotas. They have the same effects on efficiency, imports, quantities and prices, but different distributional effects. Under a quota, foreign firms are restricted to a limited number of exports, specialize in high-price goods, and extract profits - look at the Japanese VERs in the 1980s. Under tariffs, the exact same thing happens but the 'profits' become domestic government revenues.

Carbon tariffs are the same. Without the tariff, foreign firms can exploit cost differences to extract profits. With the tariff, those profits become government revenue.

 

[RalofTyr]

This is why I think there should be carbon trading between nations. Each nation must account for the net carbon it emits, and then purchase offsets from other nations. The nations that have not polluted to date are given pollution credits that they may sell, while nations that have already polluted have a carbon debt that they need to mitigate.

There's still no solid proof carbon is bad for the environment. There are a lot of other pollutants that are far, far worse.

Well, sometimes consumers are wasteful and don't heed their impact on the environment. I often see people wasting food that takes a lot of resources to create and distribute. I think it is important that we remind developing countries not to do the same mistakes we do.

Mistakes? What mistakes? The West had the highest living standard thanks to their pollution. Who are we to decide they are making a mistake and impose a tax on them?

 

[SS-18 ICBM]

Mistakes? What mistakes? The West had the highest living standard thanks to their pollution. Who are we to decide they are making a mistake and impose a tax on them?

Pollution and waste isn't a mistake?

First-order, putting a carbon tax on domestic firms has similar international effects as a quota on foreign goods*, in the sense that foreign firms can extract profit from the cost differential between foreign and domestic production. With a carbon tariff, if properly implemented, those profits can be 'captured' by the domestic government. It would hamper international trade to the extent that additional costs always reduce trade. That can be good or bad depending on if you are more worried about the economic gains from trade or the potential environmental damage from trade.

Would it force those countries to lower emissions? Indirectly, and only to the extent that said country's economy is export-driven.

Well, the intent was a level-playing field for both domestic and international products in terms of carbon taxes to prevent excess emissions. If there were only domestic carbon taxes, imports would increase which would negate the possible reductions in emissions from domestic sources. The profits which would have been obtained by foreign companies would instead be used by the government to sponsor programs to further reduce carbon emissions.

 

[El_Machinae]

There's still no solid proof carbon is bad for the environment.

Depends on what you mean by 'environment'. Like most pollutants, it's worse when it's compounded by other factors. So, burying a pollutant deep underground isn't really bad, but loosing it into water is bad. Acidifying the oceans might not be too bad, but doing so too quickly and during overharvesting of the oceans is bad.

Though when I talk about carbon pollution, I'm mostly interested in the economic effects it will have on others. I think there's quite a bit of ecological momentum in order to mitigate the environmental concerns, because people are okay with changing environmental sanctuaries no matter what is changing the climate. If species' migration patterns need to change, hopefully people're okay with changing the nature of protected areas.

There are a lot of other pollutants that are far, far worse.

And much more expensive to deal with too. People should certainly be trying to help reduce those other pollutants

 

[Narz]

It's an insane idea. Economic measures should be made against individuals and corporations that pollute, not applied on a nationwide basis according to average statistics.

Agreed. I agree with heavy fines for environmental disregard (even libertarians should agree because environmental degradation is an extension of the "swinging fist) and ecology is part of our collective "face") but not in this way.

 

[Masada]

I disagree. If the aim is to reduce global carbon emissions then a tariff is absolutely essential.

Read the OP:

In the interests of equal competition between local and foreign goods, a carbon tax on imported products from countries that pollute a lot. What would be the potential effects of this tax?

Now tell me how the hell do you expect me to accurately figure out the carbon emissions of every potentially polluting import entering Australia or America or wherever? And if you say "industry-wide" or anything else you've just defeated the rest of your argument viz. externalities.

Otherwise one just ends up exporting carbon emissions abroad, which helps nobody.

You can't avoid that don't kid yourself.

It's a simple matter of competitiveness.

It's the same sort of "competitiveness" argument which allowed Australia & New Zealand to have tariff creep which reached 50% or more on many products.

A carbon tac makes domestic production less competitive because it must factor in externalities.

So does any tax minus the externalities.

A foreign producer who doesn't need to account for said externalities can produce more cheaply.

Good for them.

The problem is that this means said externalities are not eliminated. Pollution is still damaging the world. A tariff means that those externalities are accounted for.

The paperwork alone for this idea would be incredible. The effectiveness would be next to nil.

Without one a carbon tax/market is somewhat ineffectual.

These schemes are going to be ineffective until the world is on board.

It's not a matter of helping exporters, importers or domestic industry. It's a matter of effectively capturing externalities.

A pertinent question: where does all the revenue from the tax go in the first place? Answer: back into the same companies back pockets to fund adaption. That answers this thread.

 

[bhsup]

I am a bit confused. Just who is going to institute carbon caps on sovereign nations that have no obligation to adhere to them?

 

[SS-18 ICBM]

You can't avoid that don't kid yourself.

I believe the point of the carbon tariff was to also lower emissions from countries planning to export products by reducing trade volume.

The paperwork alone for this idea would be incredible. The effectiveness would be next to nil.

What do you think the carbon tariff would do instead?

These schemes are going to be ineffective until the world is on board.

Why is that? A country with carbon taxes would lower its carbon emissions, and carbon tariffs would prevent the emissions reductions being negated by increased exporting from other countries.

A pertinent question: where does all the revenue from the tax go in the first place? Answer: back into the same companies back pockets to fund adaption.

I have no idea what you mean by this.

 

[Integral]

@Masada,

While assessing national origin (to implement a proper, emissions-based tariff) is difficult, the infrastructure is already in place to do so - there are 'rules of origin' procedures for discriminating between NAFTA and non-NAFTA goods, for example. That could plausibly be extended to applying carbon tariffs.

Setting the tariff efficiently would be a bureaucratic nightmare, but then so is all optimal taxation.

 

[Ayatollah So]

A lot depends on whether we consider 'ideal' carbon tariffs or carbon tariffs as they are likely to be implemented. Ideally, it's a second-best solution where the first-best would be coordinated policy action (a global cap-and-trade or global carbon tax).

There's no first without the second. A global agreement will never get every last nation on board, and there's got to be some way to dissuade cheaters and dissuade more nations from walking away from the deal.

Yeah, tariffs as implemented might suck, but let's see the legislation before we say no.

 

[lovett]

Now tell me how the hell do you expect me to accurately figure out the carbon emissions of every potentially polluting import entering Australia or America or wherever? And if you say "industry-wide" or anything else you've just defeated the rest of your argument viz. externalities.

As Intergral said, the infrastructure is in place to do this. I'll cede that politically there's a good chance that said tariffs will be placed far too high. But that's not a reason the reject the idea on principle.

Good for them.

Yeah. Good for them. Just like dumping nuclear waste of the coast of Africa is 'good for us'. That doesn't mean we should be doing it, and not have to pay to clean it up. The entire point about carbon emissions is that global warming is global. If foreign countries start polluting more we still have to pay for externalities they created. Shipping our pollution off shore like that doesn't help us one bit, and certainly doesn't help the world one bit. So it might be 'good for them' but it's bad for the rest of the world, and specifically it's bad for us.

These schemes are going to be ineffective until the world is on board.

A scheme without some sort of tariff is ineffective unless the world gets 'on board'. moreover, such a scheme give no incentive for the rest of the world to adopt emission policies. Indeed if much of their investment is because of the lack of said policies, they actively discourage them. A scheme with tariffs is probably the best way to persuade a sovereign nation to reduce their emissions.

A pertinent question: where does all the revenue from the tax go in the first place? Answer: back into the same companies back pockets to fund adaption. That answers this thread.

I have no idea what you mean by this. The revenue from any pigovian tax should go towards recompensing the victims of aid externalities.

 

[amadeus]

As Intergral said, the infrastructure is in place to do this. I'll cede that politically there's a good chance that said tariffs will be placed far too high. But that's not a reason the reject the idea on principle.

Crippling the global economy is a very good reason to reject it, IMO.

 

[El_Machinae]

@Masada,

While assessing national origin (to implement a proper, emissions-based tariff) is difficult, the infrastructure is already in place to do so - there are 'rules of origin' procedures for discriminating between NAFTA and non-NAFTA goods, for example. That could plausibly be extended to applying carbon tariffs.

Setting the tariff efficiently would be a bureaucratic nightmare, but then so is all optimal taxation.

Some quick ideas would be to not have tarriffs in place with countries that have acceptable carbon laws. There could be a third party system which validates certain industries for their carbon neutrality. There could be a general price tariff put onto imported goods, coupled with a generalisation system for calculating the amount of pollution generated by each product.

 

[lovett]

Crippling the global economy is a very good reason to reject it, IMO.

Well assuming carbon taxes are justified in the first place then reducing carbon emissions is more important then the damaging affect of said taxes. Same with tariffs. Basically the idea is that doing somethings is less costly then doing nothing, even if both seem 'costly'.