Thursday, March 27, 2008

Tariffs

Could carbon tariffs be a suitable response to the developing world's reluctance to sign on to mandatory carbon emission reductions?

It seems to me that we should be valuing the environmental costs of allowing carbon emitters to treat carbon emissions as externalities, and force the internalization of that cost. We can do that within our own jurisdiction through carbon taxes or cap and trade, but without coherent and comprehensive international obligations the outside world is free to emit carbon and then sell the goods produced at a price that continued to treat carbon emissions as externalities. Unless we tax them entering the country. So it doesn't seem like such a bad idea to me.

And just to clarify... if these things are implemented properly I don't anticipate a situation where carbon emissions continue or are slightly reduced and tax revenue is raised from what is emitted. If environmental costs are properly valued then they should impose an economic cost on environmentally unsustainable practices so great that in practice, those activities are rendered obsolete. For example, carbon emissions that lead to global climate change will lead to catastrophic environmental damage. The greater the environmental damage caused by an activity then the limit to the economic costs should approach infinity. If I could press a button for pretty little calculus operators than I could demonstrate, but I can't, so just try to picture that. As the actual costs to society of carbon emissions come to be reflected in the costs of the products they create, those products will be undercut by products created through carbon neutral processes.

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