China accounted for most of this surge, accounting for more than 90% of the global increase. India contributed an even larger share. Fortunately, emissions reductions have been seen elsewhere, primarily in wealthy countries with developed clean energy technologies. The United States and the European Union have combined to reduce greenhouse gas emissions by about 6%, or about 606 million tons. China currently emits more carbon dioxide than all developed countries combined.
It seems like the world’s rich countries will be the first to decarbonize. They emit most of the greenhouse gases currently in the atmosphere. But unless China, India and other large developing countries cut their emissions more aggressively, justice and injustice will go hand in hand.
The world cannot expect them all to do it on their own. China, in particular, seems likely to be unable to fulfill the rather weak commitments it made in Paris. Fortunately, there are sticks available to accelerate decarbonization ambitions. It’s a tariff based on the carbon in imports to the United States, the European Union, and other rich countries.
This idea is not new. A few months before the Paris Climate Summit, Nobel Prize-winning economist William Nordhaus proposed the creation of a “climate club” of countries committed to reducing emissions.
The EU is moving towards the creation of such a club. By 2026, the Carbon Border Adjustment Mechanism (CBAM) will bring high-emitting sectors such as steel, aluminium, fertilizers, hydrogen, cement and electricity into line with domestic prices for carbon currently set by emissions trading systems. It is planned to start taxing imported goods. Approximately 60 euros per ton. In contrast, U.S. climate policy lies primarily in Inflation Control Act (IRA) incentives for the deployment of clean energy technologies. While the U.S. government is concerned about the prospect of European carbon tariffs (which would be a significant blow if the CBAM were to expand to include U.S. exports in areas such as plastics and chemicals), European countries Dissatisfied with the IRA’s exclusionary subsidies, they are eager to recreate them.
Instead, harmonize policies, establish climate clubs to share subsidies and other benefits, set taxes based on the carbon content of key industries, and impose taxes on both imported goods and domestic products from high-emitting producers. A tax would protect local industry. From dirty competitors overseas. It would also give high-emitting countries such as China a strong incentive to clean up their own production. and they will prevent quarrels among themselves.
The idea of using tariffs as part of the decarbonization toolkit is gaining ground. Several Democratic lawmakers have introduced bills aimed at replicating Europe’s CBAM. President Biden has launched a Clean Steel and Aluminum Club initiative with the EU and G7 countries that includes tariffs on imports from high-emitting sources. In 2022, G7 countries agreed to consider creating a climate club, which could include such a levy to spur progress.
In Washington, the Progressive Policy Institute released a proposal inviting the United States and the European Union, as well as other G7 countries and the Organization for Economic Co-operation and Development. Similar to Europe’s CBAM, this club will focus on a few highly polluting industries, but instead of imposing a price on carbon, it will determine a carbon intensity benchmark for each industry and levy a levy on producers who exceed it. will be imposed. Imports from least developed countries with low global emissions could be exempted. And the levy could increase over time to encourage faster decarbonisation.
Unfortunately, the G7 has shown little visible progress on its plans. And in the United States, the idea risks being thwarted by Republican opposition to putting a price on carbon, taxing emissions and doing many other things to combat climate change. Republicans could agree on a carbon tax limited to imported goods, but such a discriminatory policy would likely run into legal trouble at the World Trade Organization and invite retaliation.
Still, tackling climate change requires more aggressive progress by large emitters other than the wealthy. And they’re not moving fast enough. In 2023, China will add about 50 gigawatts of coal-fired power plant capacity, roughly the same as the combined installed capacity of Indonesia, Germany, and Japan.
This situation could change more quickly if China faced penalties as well as incentives to clean up. No one wants to be banned from the clubhouse.
