The EU Contemplates A Carbon Tax At the Border, Spain Is Latest to Declare Climate Emergency

Image: China Daily

The European Union is seriously considering imposing a carbon border tax on items it imports from countries that do not meet climate goals, and the U.S. is apparently pushing back arguing that this would hurt U.S. businesses and jeopardize a purported U.S.-E.U. trade deal. The EU plans to impose a carbon tax on its own businesses in order to get them to reduce their use of fossil fuels, but in order to level the playing field for EU businesses with imports, they would have to impose a similar tax on goods coming in from countries that don’t impose a similar tax domestically.  Meanwhile, Spain’s socialist-led government passed legislation declaring a national climate emergency as a first step to enacting ambitious domestic measures to fight climate change

Why This Matters:  It may not matter that the U.S. is withdrawing from the Paris Agreement because the rest of the world is going to make the U.S. comply with it one way or another.  At the World Economic Forum last week, the Europeans claimed it was more than just a climate issue — it is a “fairness” issue in order to get all the large emitters to lower their emissions not just penalize companies in their own countries.  The race to the bottom on carbon emissions must be reversed and this is how it can be done.  The whole point of the World Trade Organization is to level the playing field for trade globally — there is no reason why a government allowing “free” carbon pollution should be treated any differently than any other government subsidy.

The U.S. Threatens Punitive Actions

The announcement by the EU leadership on a possible carbon border tax and the U.S. government’s response presage a trade war between the U.S. and the E.U.  Secretary Mnuchin appeared to be skeptical of a carbon taxes and fees — at the World Economic Forum he said, “I don’t think we know how to price these things.”  Mnuchin also argued to ECB President Christine Lagarde that carbon taxes are bad because they would be, in effect, “a tax on hard-working people.”  And Commerce Secretary Wilbur Ross pulled no punches, saying that the U.S. will take punitive action against the E.U. if its measures prove to be “protectionist.”

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