May 5, 2020 - Energy & Environment

The climate imbalance of trade barriers

Ben Geman, author of Generate
Reproduced from Energy Institute at HAAS; Chart: Axios Visuals

A new working paper finds that trade barriers worldwide are generally lower for carbon-intensive goods than cleaner products, creating a large "implicit subsidy to CO2 emissions."

Why it matters: UC Berkeley economist Joseph Shapiro pegs this "subsidy" at $550 billion to $800 billion annually, making it harder to fight climate change.

How it works: The paper explores tariffs (shown above) and other import penalties on a vast array of goods.

  • Penalties are generally lower on "dirtier" sectors — think metals and petrochemicals for instance — used as manufacturing inputs for consumer goods.
  • Shapiro concludes that ending the trade restriction imbalance between "dirty" and "clean" industries would help curb emissions.

The bottom line: "The resulting change in global CO2 emissions has similar magnitude to the estimated effects of some of the world’s largest actual or proposed climate change policies," Shapiro writes.

Why you'll hear about this again: The EU is planning "carbon border adjustments" to keep domestic industries from being undercut by competitors in nations without climate policies.

  • Plus, White House hopeful Joe Biden's platform vows "fees or quotas on carbon-intensive goods from countries that are failing to meet their climate and environmental obligations."

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