Carbon mitigation schemes are inherently protectionist

by Marlo Lewis on March 18, 2009

Thanks, Fran, for blogging on the carbon tariff threat to the peace and prosperity of the world.

We should all remember that carbon tariffs are no mere quirk of this or that administration, political party, or government agency. Protectionism is an inherent feature of carbon suppression policies, for three reasons:

(1) Companies and labor unions in carbon-constrained countries will demand carbon tariffs to “level the playing field” vis-a-vis firms in non-carbon constrained countries. Absent carbon tariffs, domestic industry and labor will not support cap-and-trade or carbon taxes.

(2) Carbon suppression programs all exhibit the classic collective action problem. However much it might be in the collective interest of every nation to “save the planet,” it is in the separate interest of each nation to free-ride on the sacrifices of others. The environmental harm any individual country incurs because it cheats on its emission reduction obligations is likely to be immeasurably small (even if we assume that global warming is an unfolding catastrophe), whereas the gains from cheating are likely to be both measurable and substantial. Unless credibly deterred and punished, cheating will be widespread and the system will collapse. Absent the threat or use of military force, trade sanctions (carbon tariffs) are the only way to prevent cheating.

(3) The EU-IPCC-Al Gore goal of achieving a 50% reduction in global emissions by mid-century is impossible absent deep emission cuts in developing countries. As this U.S. Chamber of Commerce presentation shows, the vast majority of the growth in global emissions is projected to occur in developing countries. Thus, even if industrialized countries go cold turkey and cut their net emissions to zero by 2050, developing countries would have to cut their CO2 emissions 62% below baseline projections to achieve a 50% reduction in global emissions. Whether trade sanctions would be enough to bully China and India into cutting their emissions is doubtful. One thing is certain: Preaching Gorethodoxy is not going to make them stop building coal plants and buying automobiles.

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