Fight climate change with the help of climate tariffs

This distorts competition and, in extreme cases, can result in the affected companies relocating their production to other countries with less stringent emission requirements. This could lead to an increase in their total emissions.

The American environmental economist William Nordhaus foresaw the problem long ago and called for a “climate club” when he received his 2018 Nobel Prize in Economics. The idea is simple, but it harbors political risks in the heated climate debate: Countries that want to achieve their climate goals more quickly with emission certificates, a CO2 tax or strict regulation form a “club” and raise the level of climate-damaging imports of “non- Members “an import duty.

That is also the economically logical justification for a CO2 border adjustment that the EU would like to introduce by 2025. The same idea is in the latest trade agreement with which the US and the EU settled their trade dispute over steel and aluminum imports. In the words of US President Joe Biden, the new agreement is intended to help “restrict access to our dirty steel markets from countries like China”.

Political explosive for the world trade order

From an economic point of view, such punitive tariffs are a “no-brainer” for climate polluters; in terms of trade policy, they are tricky. Even the Federation of German Industries, whose members would largely benefit from a CO2 border adjustment, warned that “border adjustment measures could cause considerable disadvantages in exports and even trade conflicts”. Not all industries can switch to climate-friendly imports and would either have to pay the higher costs with lower profits or pass them on to their customers.

In addition, for a fair calculation of a CO2 compensation one would not only have to calculate the costs of climate protection. This is entirely possible for countries with emission certificates or CO2 taxes. But how can the costs of strict regulations be converted into a border adjustment?

It is likely to be just as difficult to determine the carbon footprint of the individual commodities as precisely as possible in order to rule out price distortions. Even if the American “Climate Leadership Council” claims that products made in the USA such as metals, chemicals, electronics and vehicles produce 40 percent less carbon dioxide than the global average.

China warns of new protectionism

For many emerging and developing countries that want to take more time than the industrialized nations to achieve their climate goals, the idea of ​​a CO2 border adjustment is in any case a disguised protectionism. “The fight against climate change should not become a pretext for attacks on other countries or trade barriers,” warns Chinese President Xi Jinping, for example. It would actually be the task of the World Trade Organization (WTO) in Geneva to resolve such trade conflicts and prevent global competition distortions through different national climate targets.

“The WTO is seen by many as an institution that not only has no solutions to environmental problems to offer, but is part of the problem,” said US Trade Representative Katherine Tai in the spring. Without saying, of course, that the USA is one of the biggest brakes on WTO reform.

If we are really serious about climate protection and want to make it economically fair, there is no way around a CO2 border adjustment. It inevitably produces losers – especially in countries that are still in the middle of industrialization.

Global trade conflicts can therefore only be avoided if the pioneers in climate protection help the laggards to catch up quickly. That is why it is so important that the rich industrial nations provide the poorer countries with an annual boost of 100 billion dollars in climate protection.

More: Greenpeace: Poor countries need trillions of climate aid – Boris Johnson calls for more ambition at the midpoint of the summit