Carbon tariffs? Not if we get there first!

At least on the international stage, the proposed imposition of a ‘carbon tariff’ on imported goods has risen to prominence as perhaps the most contentious component of the Waxman-Markey bill climate change bill. Set to hit the Senate next month, the Obama administration’s efforts to show some kind of progress on climate change have come under heavy fire abroad.

The tax in question would levy a fee on imported goods proportional to the levels of CO2 involved in their production.

Given that a substantial portion of its economy is given over to producing vast quantities of goods destined for US consumers, China in particular has, after a fashion, been importing a share of America’s carbon emissions for quite some time. The idea that should now be punished for so doing has put more than a few noses out of joint. “Since we’re producing about a fifth of our emissions on their behalf, we ought to be treated properly. This is only fair,” argues Xie Zhenhua, deputy head of China’s economic planning body, the National Development and Reform Commission.

Frustratingly hard to contend with, this issue of ‘fairness’ has become the standard go-to for developing countries seeking to avoid commitments on emissions reduction: don’t put this on us. You broke the climate, you fix it. But as the next round of climate talks at Copenhagen looms, this closing of ranks along post-colonial lines is increasingly threatening to strangle genuine innovation on the issue of how to actually fix things.

More praise then, to Fan Gang, head of the Chinese think-tank the National Economic Research Institute, who outlined his proposals on how to respond to Waxman-Markey to the Chinese Guangzhou Daily newspaper last week:

“Fan’s suggestion runs as follows: at our current development stage, we can’t accept the imposition of specific emissions quotas, and we mustn’t have our hand forced on entering into any international agreements to that end. But if we announce our own domestically imposed carbon tariff, it could neutralize America’s plans entirely. What’s more, if we impose ours first, any American attempt to do likewise would effectively amount to double-taxation, which contravenes the principles of the WTO.

Yes, imposing something of this nature will inevitably harm competitiveness and ramp up costs for our own companies. But if we don’t and someone else does, an increase in costs will be unavoidable anyway. Getting in first means that we’ll be able to deploy the money raised in helping our own companies reduce their emissions. If developed countries then end up landed with self-imposed emissions quotas, their costs will increase as well, so in the long term the relative cost for China should be virtually nil.”

Fan’s proposals are unusual in a number of ways: firstly, they cut across the usual east-west tug of war in an unusually long-sighted manner, offering a way in which China could profit by acting first, rather than digging its heels in. Second, they turn the post-colonial victim complex (a feature in politics across much of the developing world and a centerpiece of China’s international persona in particular) on its head. Instead of bawling out America for threatening to throw sand in its face, Fan suggests China is suggesting that China delivers a pre-emptive kick in the balls of its own, “turning passive to active.”

Although the chance of Fan’s views becoming policy anytime soon are pretty slim, it’s heartening to see a mainstream member of China’s body politic thinking well beyond the traditional frame of the climate-change debate. If politicians and thinkers on both sides can start seeing climate change as more than a zero-sum game between first and third world, then maybe – just maybe – the environment might end up as the winner here.