A New Tax on Greenhouse Gases
The European Union has approved the world’s first carbon tax on imports. It’s designed to make certain products a lot more expensive if they come from manufacturers that aren’t paying for their greenhouse gas emissions.
It didn’t get a lot of attention, but it’s a big deal because these kinds of tariffs could be very effective in reducing the industrial carbon dioxide emissions that are heating the planet to dangerous levels. It’s a potentially powerful incentive for countries to curb emissions. But it’s also a risky move in some ways because it could disrupt global trade and have an outsize effect on poorer countries.
Here are a few key things to know.
First, what is a carbon border tax?
The stated goal of these tariffs is to level the playing field. Imagine that European steel manufacturers are paying a fee for their carbon dioxide emissions and their competitors outside the E.U. aren’t.
That would put the European countries at a disadvantage on price. It could, in theory, also push European companies to relocate their operations to countries where carbon isn’t taxed. That’s what specialists call “carbon leakage,” the idea that emissions can just move elsewhere when restrictions are imposed.
Source: The New York Times
