Contrary to what you’re hearing from the noise media, Copenhagen was not a complete bust. The agreement to reduce deforestation was an important step forward that could become as significant as any cap-and-trade system in reducing net carbon emissions. And the pledge by industrialized countries to commit billions to assist developing countries in reducing their emissions and adapting to global warming is vital to millions of the worlds’ people.
Granted Copenhagen is only a first step that must be followed up with a binding treaty to limit carbon emissions. At the moment that appears difficult to achieve because of the absence of consensus among 182 participating countries. But the real news is that there is a startling degree of consensus among the industrialized countries and some of the rapidly developing countries that something must be done fast.
The way to proceed now is for President Obama to convene a summit of nine major industrialized countries, including the European Union, Japan, China, Russia, Canada, Australia, South Korea, and India. Such a summit could hammer out an agreement that would at least bind the participants. The real problem isn’t getting 100% compliance. These nine countries alone represent more than 75% of the world’s carbon emissions, which comes to more than 20 billion tons of carbon dioxide annually. Unanimity would be nice, but as health care reform proved, it’s more important to have the votes you need than all the votes you want.
One way to achieve a global reduction in carbon emissions would be for all countries to impose a tax on carbon emissions for all domestic goods and imports. Carbon taxes are both easier to set and easier to administer then a cap-and-trade system. After the recent financial crisis we’ve all learned how easily a market can be manipulated by money managers, and how difficult it is for governments to police a trading system.
If all of the industrialized countries imposed a carbon tax of just $6 per ton on carbon emitted, that would generate roughly $100 billion in tax revenues per year based on projections by the Nobel Prize winning economist Paul Krugman. That is more than these countries are now planning to spend on increasing energy efficiency and aiding developing countries to preserve forests and reduce their carbon emissions.
But what if we could not achieve a consensus among this group of nine? Then we should impose a carbon tax on imports from any country that fails to agree to an internationally mandated reduction in carbon emissions. If India wants to produce steel cheaply without regard for the global consequences then make India pay for it. The revenues could be plowed back into technology at home and abroad to reduce carbon emissions.
Would a carbon tax unfairly burden developing countries? Not if we treat all countries the same as we treat out own industry. It would create an incentive for all countries to raise the regulatory floor and participate in a global effort to reduce climate change. The consequences of not acting will hurt developing countries far more than it hurts us.
And if we just imposed a carbon tax on imports from countries that refused to comply with an internationally mandated limit on carbon emissions would that violate our international trade commitments under the GATT? Not necessarily. It would depend on how it is levied. GATT explicitly allows importing countries to discriminate against imports that threaten exhaustible natural resources. Global warming is threatening our planet, which is itself an exhaustible natural resource,
If other governments are unwilling to sign onto an international pact to save earth, then we should neutralize their carbon footprint by imposing a carbon tax.