The New Carbon Cycle

Global Food Transportation May Be Pulled Into EU Emissions Trading System

In a New York Times article entitled The Environmenta Costs of Shipping Groceries Around the World, the issue of the greenhouse gas emissions from shipping fruit, vegetables, fish, and other food products is discussed.  The article describes the move by the European Union to add air transportation to the EU Emissions Trading System (ETS) would put a cost on air transportation of food and manufactured items.  The EU is reviewing the addition of shipping emissions to the ETS as well.  Many of the countries that produce these food items complain that the charging of a carbon tariff or requiring the purchase of offsets or allowances for these food items is a form of trade protectionism.  As the debate over the transportation in this article, and production (including use of electricity from coal-fired power plants) continues, countries will find themselves debating over the emissions and costs to compensate for the potential impact on climate change and global warming. 

An Economist with CIBC in Canada Predicts Carbon Tariffs Will Bring Jobs Back to North America from China and Other Developing Countries

An economist with CIBC World Markets Jeff Rubin has issued a report predicting that Canada will impose carbon taxes or carbon tariffs on imported goods from China and other developing countries that do not have restrictions on greenhouse gas emissions. He also predicts that this will cause jobs and manufacturing to come back to North America, because emissions and energy efficiency will be more important than labor costs. He states that non-metallic mineral products - cement, glass and lime - with energy intensity 130 per cent higher than the Chinese industrial average, are likely to return to North America, as well as the printing, primary metal manufacturing, and machinery industries.

Rubin believes the tariff, based on $45 per tonne of carbon dioxide or equivalent, would raise roughly $55 billion a year from Chinese exports to the United States, and raise U.S. consumer price inflation by more than 0.6 percentage points.

“What I'm suggesting is that the minute that we start putting a price on our own domestic emissions, then our tolerance of those who do not is going to fade very quickly," Rubin said. "What we're going to say is that if you don't play by the same carbon rules, that's an unfair trade subsidy that we're gong to countervail against."

This is an interesting prediction that may ignore the post-Kyoto treaty negotiations and the potential challenges that such carbon taxes or carbon tariffs may face in the World Trade Organization.  It is a continuing issue that I have posted on several times on this blog, and not one that will go away if China, India, and other developing countries with significant greenhouse gas emissions do not agree to some form of cap and then reductions in their emissions.

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.