Carbon Border Taxes Face Debate, Unjust or Necessary?

Image: Raimond Spekking via Wikimedia Commons

by Amy Lupica, ODP Staff Writer

Carbon border taxes are gaining popularity in North America and Europe, but many are skeptical that taxing imports from countries with weak emissions policies will encourage climate action. Others are calling border taxes unjust. John Kerry, the U.S. Climate Envoy, called border tax policies a “last resort.” Nevertheless, Congressional Democrats have already proposed one such approach to include in an upcoming $3.5 trillion reconciliation bill, and the EU is looking to implement its own.

Why This Matters: Many environmentalists and critics have called on the U.S. and other wealthy, high-emission nations to lead the way on global climate action and rally developing nations to pass climate policy. Just last week, President Biden and German Chancellor Angela Merkel announced a partnership between their two countries to raise global climate ambition via mobilizing financial resources, sharing and deploying new technology, and helping developing nations adopt renewable energy. Still, some lawmakers believe that a good way to rally global climate ambition is with trade mechanisms.

But even those that advocate for these mechanisms acknowledge that a carbon border tax could significantly impact the U.S.’s global economic standing and create tension with trade partners it will need to achieve its own climate goals.

Protecting Interests: Carbon border taxes are generally designed to soften the impact a green transition may have on the transitioning economy. For example, to import steel, iron, or other commodities into the U.S., a country would have to pay a tax based on the emissions produced by creating those commodities. The policy proposed by Senate Democrats would designate the taxes collected to protect companies that stand to lose profits as the nation transitions to net-zero emissions and is estimated to bring in between $5 billion and $16 billion annually.

Senator Chris Coons of Delaware and Representative Scott Peters of California, who proposed the policy, said the plan would protect “workers and manufacturers” from economic instability. Critics say it’s nothing more than corporate welfare for fossil-fuel companies. “They’re proposing a border tax because they know punishing regulations and taxes will drive U.S. businesses overseas,” said Republican Wyoming Senator John Barrasso, whose state is a major producer of coal, natural gas, and oil. He suggests that the best way to move forward is to focus on making energy “cleaner and more affordable.”

Arvind Ravikumar, director of the sustainable energy development lab at Harrisburg University of Science and Technology, thinks that border taxes like the one proposed are unjust. He says that carbon border taxes put the onus on developing countries to pay taxes they can’t afford on exports the U.S. has historically exploited them for.

To actively promote such fossil-fuel development and then punish developing countries for emissions through carbon border adjustments is, at best, hypocritical. It’s also unjust.” Ravikumar wrote in the MIT Technology Review, referring to the U.S.’s efforts to secure fossil fuel resources abroad and exporting emissions to producing countries.

He believes that partnerships, not punishments, will be the key to successfully fighting climate change. “The Paris Agreement succeeded because it gave real agency to developing countries,” he wrote. “It made them partners in the fight against climate change, as opposed to mere observers. That’s how the world will solve the climate crisis—with a deep understanding of what it means to share the burden equitably.”

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