Carbon Tarriffs again Threatened by the EU against China and the US

Once again the call for “carbon tariffs” has risen as European Union leaders according to an Associated Press article threatened the United States and China with trade sanctions if the two largest emitters of greenhouse gases do not join in an international treaty in 2009 to reduce their emissions.  Carbon tariffs have been the subject of a prior post on this blog.  The problem is that the economy is weakening, and the potential the impact on industry from the EU’s pledge to reduce greenhouse gas emissions by 20 percent from 1990 levels by 2020 is raising strong concerns from industry that the US and China will not be facing economic impacts from taking similar steps—what the Europeans see as an competitive disadvantage.

Next year is important because the United Nations is set for a global conference in Copenhagen, Denmark to negotiate the treaty that will follow the Kyoto Protocol and how to reduce and adapt to global warming.  The  US has previously been unwilling under the current President to agree to a cap on US emissions.  The twenty-seven EU leaders after a two-day summit reportedly warned: "If international negotiations fail, appropriate measures can be taken" to protect European industry.  French President Nicolas Sarkozy was reported to have stated, "Our main concern is to set up a mechanism that would allow us to strike against the imports of countries that don't play by the rules of the game on environmental protection.” German Chancellor Angela Merkel stated, "Industry, faced with global competition could be exposed to a real disadvantage if no international climate accord is struck, but we in Europe have very strict rules."

China continues to argue against any cap on its emissions.  It does not appear likely an international treaty can be effective unless these two countries pledge to reduce their emissions.

British Prime Minister Gordon Brown appeared concerned about too much trade saber rattling, "I don't think we should allow things to stand in the way of getting the best possible international agreement.”

Other suggested steps to reduce the impact on EU industry have included a German proposal to reduce emission limits on steel and cement under the EU climate change legislation.  This brought on serious objections from environmentalists in the EU who are striving to keep the 20 by 20 reductions in place.

One proposal from Prime Minister Brown was a reduction in sales taxes on environmentally friendly products.  This would tip an advantage to those products made through low carbon processes.

In any event, it appears the battle is being set between the US, China, and the EU over greenhouse gas emission cuts.  The question is whether the US will go to the side of the EU, its traditional ally, or move toward China, its traditional competitor.  With the presidential elections in November with three pro-climate change candidates, most experts are betting the US will move toward its historic ally. However, the politics of climate change may be hard to predict.