China accounted for most of this jump — more than 90 percent of the worldwide increase. India contributed another large chunk. Fortunately, there were emissions reductions elsewhere, mostly among richer nations with more developed clean energy technology. The United States and the European Union reduced their combined greenhouse gas emissions by some 6 percent — roughly 606 million tons. China now emits more carbon dioxide than all advanced nations put together.
It feels just that the world’s rich countries decarbonize first. They emitted most of the greenhouse gasses currently in the air. But unless China, India and other large developing economies pare their emissions more aggressively, the just and the unjust will broil together.
The world cannot count on them all to do it on their own. China, in particular, looks likely to fail to deliver on the fairly weak pledges it made in Paris. Fortunately, there is a stick available to encourage ambitions to decarbonize: a tariff based on the carbon embedded in the imports into the United States, the European Union and other rich countries.
This idea is not new. Some months before the Paris climate summit, the Nobel Prize-winning economist William Nordhaus proposed a “climate-club” of countries committed to reducing emissions.
The E.U. is on its way to creating such a club. By 2026 its Carbon Border Adjustment Mechanism (CBAM) is set to start imposing levies on imports in heavily emitting sectors — steel, aluminum, fertilizer, hydrogen, cement and electricity — to match the domestic price of carbon set by its Emissions Trading System, currently at about 60 euros per metric ton. U.S. climate policy, by contrast, lies largely in the Inflation Reduction Act (IRA) incentives to deploy clean energy technologies. While Washington worries about prospective European carbon tariffs (which would really bite when CBAM expands to include U.S. exports in sectors such as plastics and chemicals), European countries grouse about exclusionary IRA subsidies, while scrambling to replicate them.
If they harmonized their policies instead, creating a climate club in which they shared subsidies and other goodies, and set levies based on the carbon content in critical industries — taxing both imports and domestic products from high-emission producers — they would protect their local industry from dirtier competitors abroad. They would also provide high-emitting nations, such as China, with a powerful incentive to clean up their own production. And they would prevent fighting among themselves.
The idea of using tariffs as part of the decarbonization toolkit is catching on. Several Democrats have put forward bills that aim to replicate Europe’s CBAM. President Biden has floated the idea of a clean steel and aluminum club with the E.U. and Group of Seven countries, including tariffs on imports from high-emission sources. In 2022, the G-7 countries agreed to explore a climate club — which could include such levies to encourage progress.
In Washington, the Progressive Policy Institute issued a proposal, starting with the United States and E.U. but also inviting other G-7 countries and the Organization for Economic Cooperation and Development. Like Europe’s CBAM, this club would focus on a few highly polluting industries, but instead of imposing a price on carbon, it would determine carbon intensity benchmarks for each industry and charge a levy on producers that exceeded them. Imports from the least developed countries, which account for scant global emissions, could be exempted. And the levy could be increased over time to encourage faster decarbonization.
Unfortunately, the G-7 has made little discernible progress on its plan. And in the United States the idea risks foundering against Republican opposition to putting a price on carbon, taxing emissions or doing much else to combat climate change. Though even Republicans can agree on a carbon tax limited to imports, such a discriminatory policy would likely run into legal trouble at the World Trade Organization, and invite retaliation.
Still, addressing climate change requires more aggressive progress from the big emitters outside the club of the rich. And they are not moving fast enough. In 2023 China added almost 50 gigawatts of capacity in coal-fueled power plants, about the same as the total installed capacity in Indonesia, Germany or Japan.
If China faced penalties, as well as incentives to clean up, this picture would change more quickly. No one wants to be banned from the clubhouse.
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