The COP26 climate summit in Glasgow is almost finished and dusted off, with ambitious commitments and breakthroughs governments and businesses to tackle the climate catastrophe more aggressively. Yet although there appears to be broad agreement on What must be done to prevent the planet from getting hotter – such as reaching net zero emissions over the next few decades – big disagreements remain over How? ‘Or’ What to remove it.
As countries attempt to make jobs green while boosting exports to maintain foreign cash flow, the resort to protectionist economic policies is becoming a growing point of friction between governments. Here are two juicy examples where that dynamic plays out.
The United States is arguing with Mexico and Canada over cars. Biden administration united Mexico, Canada in anger over proposed deployment financial motivations for Americans to purchase electric vehicles made in the United States, with additional tax credits for the purchase of a car with an American-made battery or one made in a unionized factory. Some American political nerds weren’t at all surprised given Biden’s good faith as pro-union warrior.
Ottawa, however, was shocked and is now furious, calling it a protectionist move that will encourage automakers to build electric vehicle factories in the United States rather than Canada. It’s a big deal because the auto industry is one of the the largest manufacturing sectors, contributing more than $ 12.5 billion to its GDP in 2020. Mexico, for its part, is also upset, saying the US proposal undermines its plans to transition its equally crucial auto industry to electric models, which is at the heart of Mexico’s overall climate change mitigation strategy.
Mexico City and Ottawa accused Washington of violating the USMCA – a NAFTA replacement that was laborious to negotiate – which was supposed to ensure a level playing field for the three countries. Canada and Mexico could now file complaints under the pact’s dispute settlement mechanisms.
The most exclusive club in Europe: carbon. The European Union, which has made some of the world’s most ambitious climate commitments to date, has offers a carbon tax on specific imports entering the block, including steel, fertilizers, oil and cement. Essentially, Brussels wants to impose carbon tariffs so that foreign producers are subject to the same financial burdens as European manufacturers when manufacturing similar products.
Indeed, by setting a price on carbon emissions – and forcing EU-dependent economies to pay or lose large companies – the European Commission has found a way to pay, at least in part, for its very Dear Green accord.
In addition, some countries are outraged that Brussels has pushed like-minded rich countries to join its carbon pricing system in exchange for access to the EU’s single market, excluding tariffs and tariffs. quotas already in place for other goods. (Canada is now studying his own diet). Critics say that the establishment of a “transatlantic climate club” – that all states would impose either a carbon tax at the border or an equivalent emissions trading scheme – is discriminatory: the coal-loving Australian Prime Minister Scott Morrison, for example, noted the push is “just trade protectionism by another name”. At the same time, Brazil, South Africa, China and India have also complained that a large-scale carbon tax would constitute a “trade barrier”, unfairly penalizing developing countries which still depend on fossil fuels to develop their economies.
While the EU has pulled back a bit in recent months – giving countries five years to control their climate priorities – the US has not ruled out imposing tariffs if Brussels imposes carbon taxes on American products. Meanwhile, countries like China, Russia and Turkey – who risks losing a lot of an EU carbon tax – accused Brussels of violate principles of international trade.
And now? Some climate policy advocates fear that the use of coercive tools such as tariffs and tax credits will backfire, giving the economy ammunition. opponents who believe that climate policy creates a bad economy.
In the end, will global efforts to protect the planet fail over national efforts to protect certain industries?