An interesting article by Chris Hope (a climate change policy researcher, PAGE model developer, and faculty member at Cambridge Judge Business School, interested in environment and energy; archive) of – oh dear – Arctic methane ‘time bomb’ could have huge economic costs fame. But never mind that. CH looks at Sarkozy’s mooted plans to levy a “carbon tax” on US goods if trump leads the US out of the Paris agreement.
Tol, in the comments, correctly points out that France couldn’t do this alone: it would have to be EU-wide. Never mind, pretend its a EU wide plan. Tol, in the comments, points out that WTO rules only permit border taxes if there is an equivalent domestic tax which if you think about it is fair enough. If you’re going to penalise the US, you should be penalising domestic folk too. You can’t penalise the US just for storming out of your favourite agreement in a huff. But you could probably finesse that if you could demonstrate that your membership of Paris had imposed equivalent tariffs on domestic production. However, lay that aside and consider the proposal assuming it is possible.
Which brings me to part 2, which is CH’s rough calculation of the tariffs required. His numbers, which I won’t check, are that $1000 of production costs 0.4 tonnes of CO2-equiv, and the EU-cost of that is $150. Which is $60 per $1000, or an implied tax rate of 6%. Whether you agree or not, it is interesting to see the numbers written out like that. And of course you could put in your own pet cost of carbon; and you could fiddle it into energy cost per dollar for particular industries, if you wanted to make it too complicated to be usable.
How does that compare with the tariffs that are actually imposed? I find I haven’t a clue. The top Google hit is Trade in goods and customs duties in TTIP (TTIP! Horrors! Remember to hiss under your breath at the very sight of the initials). It says At just under 2%, average [I do hope they mean value-weighted, let’s hope so] customs duties between the EU and the US are generally low. But the average hides a different situation for individual products1. So, 6% is bigger than 2%. But, since the US wouldn’t actually do a great deal under Paris in the near future even if it doesn’t leave, there’s no obvious reason why you’d whack on the full 6% immeadiately; it would be more reasonable to ramp up slowly. So you could just do nothing at all, except label the existing tariffs as “carbon tariffs”, if you were feeling somewhat dishonest.
1. The document is mad, of course. Or rather, reveals the madness of existing policy (and not just in the EU). [F]or train carriages… the EU charges only 1.7% on imports from the US. WTF? Why do we charge any duty at all on train carriages? Let alone having a special category for it. No wonder we’re drowning in bloody stupid regulations when things like this are allowed to occur. It continues The EU wants to remove these duties
and other barriers to trade… but doesn’t explain why, if the EU wants to remove duty on train carriages (and it bloody well should) it doesn’t simply do so; instead of pratting around producing stupid documents. But I digress.