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After Leaving the Paris Agreement, the US Needs to Worry About Carbon Tariffs

Here's how other countries could retaliate.

by Lisa Cumming
Jun 2 2017, 1:00pm

Image: Monica McGivern/Flickr

Concern about US withdrawal from the Paris Agreement, which was made official on Thursday, isn't just about the environment. It's about international trade, too, and what the impact will be on businesses that still abide by obligations to cut carbon emissions when US doesn't have to play by the same rules.

Canada is grappling with this now, and critics are sounding alarm bells that a US withdrawal from the Paris climate accord will hurt competitiveness north of the border. Trade experts suggested to CNN that Trump may spark a trade war with his decision. But should other nations look at imposing a carbon tariff—which is essentially a border tax on any imports from countries that aren't doing enough to fight against climate change—to level the playing field?

"Canada isn't in a position now to enact carbon tariffs on the US," said Matthew Hoffmann, co-director of the Munk School's Environmental Governance Lab and Professor of Political Science at the University of Toronto Scarborough. That's mainly because the two countries are so closely entwined. (Canada is the US's second-largest goods trading partner.)

The idea of introducing carbon tariffs on the US has been floated before. In November, Rodolfo Lacy Tamayo, Mexico's under secretary for environmental policy and planning, told the New York Times that a carbon tariff against the United States was an option if the US withdrew from the international climate accord. Former French president Nicolas Sarkozy has suggested that the European Union should look at something similar.

In December, the Citizen's Climate Lobby Canada, a non-profit, released a statement calling for "border tax adjustments for carbon pollution" to help Canada's competitive advantage against the US in light of the country introducing a carbon tax.

Plenty of economists say carbon tariffs are a good idea in theory, but in practice, they are risky to implement, as the example of the US and Canada goes to show.

Read More: Cities and States Vow to Resist Trump's Withdrawal From the Paris Agreement

Canada's Liberal government seems committed to the Paris Agreement, with a carbon tax is coming into effect in 2018. In Toronto on Wednesday, Environment Minister Catherine McKenna said that that Canada sticking with the other countries who are still part of the accord. (Only two nations, US aside, aren't part of the agreement: Nicaragua and Syria.) "Canada's just going to keep marching on, like the rest of the world," McKenna said.

Trump said he will consider re-entering the agreement, or renegotiating an entirely new deal, if the conditions are better suited to Americans.

"Most countries see it in their self-interest to pursue progressive climate action," Hoffmann said. He could see a change-up happening in the powers that be. "I could see China stepping into leadership vacuum," he said. "The Trump administration is wrong about the direction of the global economy."

As for how to pressure the current US administration to take climate change seriously, the international community may need to look beyond carbon tariffs and consider other options.

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