Carbon Taxes, Imports and Jobs
I note that the European Trade Union Confederation (ETUC) has called for a carbon tax on imports into the EU if Europe’s trading partners do not take actions to reduce emissions similar to those of the EU. (text follows.) The aim is to ensure that jobs in European heavy industry are not lost to lower-cost imports as costly nvestments are made in Europe to promote greater carbon efficiency.
This strikes me as a reasonable demand, that should be incorporated in future global climate change agreements.
To the extent that Canada does move ahead of the US in terms of putting a significant price on carbon, we might think about a carbon tax on imports. This might also be applied to imports from Asia.
The ETUC urges the Commission to reintroduce the carbon tax on imports in the future climate change legislation
Just days before publication of the European Commission’s “Energy and Climate Change” package, the European Trade Union Confederation (ETUC) has read the latest versions of the documents being drawn up by the EU executive. It notes with great concern that the issues of employment and social transition have been left out of the package. The ETUC consequently calls on the Commission to amend its proposal on these key points.
“It is paradoxical that, while the employment argument is used extensively in the Member States, either to oppose or to support more stringent measures to combat climate change, the Commission acts as if this question did not exist at European level“, commented ETUC General Secretary John Monks.It is imperative to revise three points:
 the introduction of a carbon tax on imports
In parallel with the greater commitments imposed, it is essential for the Union to protect heavy industry in Europe, and the corresponding jobs, against unfair competition from countries not willing to make the same effort. The risks for the competitiveness of energy-intensive sectors have been demonstrated by a number of scientific studies, including one carried out for the ETUC in 2007.
“A solution exists to keep employment and the planet from being the losers: an import compensation mechanism, such as a carbon tax, which would equalize carbon costs for companies outside Europe and in Europe. While allowing a considerable effort to be demanded from industry, such a system would keep heavy industry and jobs in Europe“, explained John Monks. “It is unacceptable for this proposal to be relegated in the Commission’s documents to the rank of a mere option, which could be decided in 2011 after a review of the situation.” For the ETUC, this is not a protectionist measure: “We want heavy industry to make a significant contribution, but in a system that gives it time to make the necessary modernisation investments and offers adequate incentives. That is the originality of our position, and we wish to see it taken further into account by environmental NGOs and industry.”
I agree thoroughly with this approach. In fact I think it could ultimately be necessary in any case to get other countries to adopt greenhouse gas reduction measures in the post-Kyoto period (if not to get Canada to take action!)
According to estimates by staff at Statistics Canada using input-output models, about one-quarter of the GHG emissions related to the household consumption of Canadians is the result of indirect GHG emissions associated with imported goods and services – close to the level of emissions from direct household fuel use.
Another approach is the proposal is that proposed by the International Brotherhood of Electrical Workers in the U.S. and included in the latest version of the Lieberman-Warner Climate Security Act (and before that in the Bingaman-Spector Low Carbon Economy Act). This would require importers of goods from countries without carbon caps to obtain emission permits for emissions resulting from the goods production, with some exceptions for countries with a small share of global emissions. See section 6 “Global Effort to Reduce Greenhouse Gas Emissions†in the following:
http://lieberman.senate.gov/documents/acsabill.pdf
(See also the New York Times article on this: http://www.nytimes.com/2007/12/16/business/16view.html )
Furthermore, there appears to be strong justification for these types of measures in international trade law. The WTO’s panel comments in relation to the Shrimp-Turtle case appears to almost call out for such measures – as long as they are applied in a non-arbitrary and non-discriminatory manner. As is stated on the WTO environmental disputes website in relation to this case:
“Many have missed the importance of the Appellate Body’s ruling on this case. It recognized that under WTO rules governments have every right to protect human, animal or plant life and health and to take measures to conserve exhaustible resources. The WTO does not have to “allow†them this right. The US lost the case because it applied its import measures in a differentiated manner. The ruling also said WTO panels may accept “amicus briefs†(friends of the court submissions) from NGOs or other interested parties.â€
http://www.wto.org/english/tratop_e/envir_e/edis00_e.htm
I’m more partial to carbon taxes and import duties in these areas as they could be cleaner and result in less privatization of profits associated with emissions trading. Calculations of the appropriate tax rate or permits would of course be complicated. Many European countries have much higher fuel taxes which are not properly carbon taxes, which would require some sorting out, but this is common in these type of trade negotiations and disputes.
I have no doubt that this is the best approach.
But would either of the “free-trade” boosting Conservatives or Liberals buy in? Not likely.
Meanwhile the NDP, which fears losing the votes of auto industry workers etc and as a result will not openly support the carbon tax, should grab onto this proposal as a way to tell workers that their jobs can be protected while still protecting the environment.
Certainly a carbon tax to prevent carbon spewing free-riders from gaining an unfair trade advantage makes sense. A country’s domestic market could be protected in this way.
In Canada though we face a more difficult challenge than Europe. Our problem goes beyond protecting our domestic market from unfairly subsidized imports. Things made here are produced largely for the North American market. By imposing a cost to carbon of any significance we run the risk of pricing ourselves out of the US market due to their cost free carbon emissions. In addition, future investment decisions will be made according to cost factors. If it costs significantly more to produce things in Canada than in the US due a high Canadian price for carbon, investment and jobs will flow to the US rather than here.
It might be possible to overcome this difficulty with an emissions trading system where credits were provided at low cost to Canadian exporters, at least until the US joined the rest of the world in dealing with greenhouse gas emissions.