As more and more world leaders consider imposing border taxes on climate-damaging goods, a new study looks at ways that can be done in countries that have not yet established domestic carbon emission markets, including the United States.
The results of the investigation are timely. This summer, EU officials launched the world’s first carbon border tariff plan. U.S. lawmakers presented their own border tax proposal last month.
The results of these efforts will have a major impact on the international trade network and the global fight against climate change.
A sort of 12 page research Released last week by Resources for the Future, a non-profit research organization headquartered in Washington, D.C., it provided a roadmap of how U.S. officials can develop border taxes without relying on internal carbon emissions markets.
The proposal reflects in many ways the legislation introduced by Senator Chris Kuhn (D-Del.) and Representative Scott Peters (D-Cal.) last month. Their bill will impose a fee on imported pollution by assessing the cost that American producers must pay to comply with current rules and regulations.
Future resources recommend exemptions for imported emissions that are equivalent to emissions from certain sectors in the United States. The United States will then apply prices for imported emissions above the exempt level based on marginal cost (the cost of reducing the most expensive one ton of carbon).
“The idea is that you are trying to encourage a reduction to the U.S. level based on marginal cost, so everyone will do the same thing, and it will be cheaper before this price… and then they will be exempted [from the fee] It’s like American producers,” said William Pizer, a senior researcher at Future Resources and a co-author of the study.
This provides countries with better incentives to do what the United States is doing, and effectively charges them the fees paid by American producers.
These incentives are vital to the global campaign to combat climate change.
As we all know, border carbon adjustments charge fees for carbon-intensive products entering countries where domestic producers are subject to stricter climate policies, and pay for these policies.
The measure aims to ensure that foreign and domestic producers face the same costs and incentives to reduce emissions. Without them, companies may transfer production to lower-cost countries. This measure is called carbon leakage because it will “leak” these emissions from one country to another without reducing them.
Recognizing this problem, the European Union, which sets carbon prices through its emissions trading system, proposed a border adjustment proposal on July 14, which will take effect in 2026. This effort has attracted the attention of economists and traders around the world, but analysts said that border adjustment is critical to solving the problem of global warming.
Pizel said: “Anytime you have something that gives people a reason to set up trade barriers, economists will worry.” “But the appropriate level of attention to what is happening in climate change means that now we must discuss something that seems to be forbidden. Thing.”
In the end, future resources research shows that boundary carbon adjustments can be designed to address the nuances of different climate policies, including those that are not based on carbon prices.
Pizer said that if the policy had a price somewhere, it would indeed work better. For example, he pointed to certain versions of clean energy standards, which include a market for clean energy credits, which are tradable or renewable combination standards that allow alternative compliance payments if the company fails to fulfill its obligations.
“Considering the real-world climate policy and the intersection with trade is much more complicated than the stylized world where everyone levies a carbon tax,” Pizer said.
But he added that this will have to be dealt with in a world where carbon taxes are not the main policy that countries are pursuing.
“There are better and worse ways to do this, and it requires more thinking,” Pizer said. “But we have begun to think about how to design it.”
forward from Electronics News With permission from POLITICO, LLC. Copyright 2021. E&E News provides important news for energy and environmental professionals.