Carbon tax's smoke and mirrors

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By Zhang Jianping (China Daily)
Updated: 2009-08-24 07:53

The carbon tariff proposed by the United States is not only an excuse for protectionism dressed in green drag, but also an act of provocation that will spur a trade war. The tariff would hamstring the rebound from the global recession and hurt the interests of developing countries.

The US House of Representatives in June approved the American Clean Energy and Security (ACES) Act, which included a provision that would let the US levy duties on imports of carbon-intensive goods from countries which do not have a binding target to reduce greenhouse gas (GHG) emissions.

Imposing carbon duties on imported goods from developing countries will help the US strengthen its competitiveness in international markets and weaken the trade advantages of big manufacturers in China, India and Brazil. Emerging economies more dependent on manufacturing will bear the brunt of the cost of the duties, as their low-carbon technologies are not as advanced as those in richer countries.

High energy-consuming and carbon-emitting industries have shifted away from the US into developing countries that are now in the unenviable position of having to purchase the high-priced technologies to meet environmental standards set by the US.

As the crucial international talks on climate change to be undertaken in Copenhagen approach, Washington's change of heart on climate change from negative to decidedly green will help the country beautify its international image and put the US delegation in an advantageous position at the negotiation table.

In reality, the US way of offsetting the cost of its own carbon use is unfair to the developing countries and will meet wide resistance.

Levying carbon duties defies World Trade Organization principles of free trade and most-favored nation status. The WTO agrees countries cannot normally discriminate against their trading partners. Lowering trade barriers is an obvious mean of encouraging trade. The barriers concerned include customs duties, import bans and selective quotas.

Carbon tariffs, in essence, erect barriers to imports into the US. If the carbon tariff is levied, it will complicate the duty system among countries, disturb the international trade order and eventually provoke trade wars.

A carbon tariff does not abide by the common but differentiated principle established by the Kyoto Protocol, an international treaty, to define the varied responsibilities of developing and developed countries for mitigating climate change.

Considering that rich countries have released much more greenhouse gases throughout history than developing countries in per-capita terms, the Kyoto Protocol agrees that developed countries should take a step toward reducing their GHG emissions from 2009 to 2012, while the developing countries lack a binding quantified target for cutting the emissions.

However, the levying of carbon taxes places an undue onus on developing countries, which will see an economic loss. Currently, most developing countries are engaged in the process of heavy industrialization, which demands high energy consumption and large releases of greenhouse gas. Rich countries, having already finished the process of industrialization, have even outsourced some highly polluting industries to developing countries, leaving the less fortunate with both more pollution and the burden of reducing those emissions.

China should intensify its participation in international trade rulemaking and prevent carbon tariffs to be written into international trade rules.

The international community should separate carbon tariffs and climate change into separate issues to be negotiated by the WTO and the United Nations Framework Convention on Climate Change.

China, as one of the world's biggest GHG emitters, has adopted a positive attitude and taken action to reverse climate change.

Still, the country must speed its transition to a low-carbon and sustainable development mode, because the shift is driven more by demand from China's economic growth than by international pressure. The country should strengthen its research and international collaboration on technology development, especially on clean energy and improvements in energy efficiency.

As a signatory to the Kyoto Protocol, China abides by the convention and is actively pushing forward the post-2012 negotiation. China released its National Action Plan on Climate Change in 2007 as the guideline to mitigate global warming.

The author is a researcher with the Institute for International Economic Research affiliated with the National Development and Reform Commission.

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