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Costly, ineffectual and protectionist carbon tariffs
OCCASIONAL PAPER
Many developed country governments are in the process of negotiating for the introduction of carbon price signals to incentivise business and consumers to reduce their carbon footprint. Individual European countries and the European Union already have Emissions Trading Schemes, Australia's Parliament is still considering the introduction of its scheme, and the United States Senate is currently considering a proposal for the introduction of a CAT scheme to be voted on in early 2010.
But the inclusion of a carbon price signal raises serious concerns about their impact on domestic industries competing against imports that don't include the cost of carbon. As a consequence some activists and politicians are arguing for the introduction of carbon tariffs on imported goods that come from countries that do not have a domestic carbon price signal.
The French President, Nicholas Sarkozy, has argued for the introduction of carbon tariffs, and a requirement for their introduction is included in the Waxman-Markey Bill before the United States Senate.
This research paper will explore the issues surrounding carbon tariffs. In particular this paper will seek to define what a carbon tariff is, where proposals for them came from, what is currently being proposed and where they are likely to be introduced, their legality under World Trade Organisation rules, the complexities of their introduction and what their cost will be.