The European Union (EU) is proposing carbon tariffs on United States (US) goods if the US does not impose greenhouse gas restrictions on its industries. The goal is to offset the costs EU industries face under current and more strict GHG emission restrictions. The Lieberman-Warner bill that was passed out of the US Senate Environment and Public works Committee would similarly impose such tariffs on countries that do not limit their GHG emissions.
The carbon tariff may present a threat by the EU against the US to attempt to bring the US into a post-Kyoto treaty. The US Congress may see carbon tariffs as a means to address complaints that if China and India do not commit to limits on GHG emissions, then an unfair economic advantage would accrue to these countries.
Questions arise as to how the Word Trade Organization (WTO) would address claims under international trade agreements. Legal issue and disputes may arise under a carbon tariff regime between WTO members. As climate change regulation is debated in the US, as the EU considers tightening their own regulations, the domestic constituencies of the various developed nations will demand action to offset a economic advantage that unregulated countries would have, particularly those with large GHG emissions.
It is not surprising that the trade ministers of various nations attended the Bali conference where the United Nations countries debated the parameters of a post-Kyoto treaty. As the international debate and negotiations continue over the next two years, tariffs on goods made in countries without greenhouse gas restrictions may become a growing threat or bargaining chip in attempting to bring China, India, Brazil, and perhaps other developing nations under a greenhouse gas cap.