The European Union’s Carbon Protectionism

Over the past four years, Donald Trump presumably was the biggest threat to global trade.

His ignorant protectionism hurt American consumers and businesses – and undermined the competitiveness of the U.S. economy.

Over the next four years (and beyond), it’s quite likely that the biggest threat to global trade will be the European Union.

More specifically, politicians and bureaucrats in Brussels want to toss a hand grenade into cross-border commerce by imposing trade taxes on nations that don’t impose carbon taxes.

The Wall Street Journal has a must-read editorial about this threat to world commerce.

Western politicians have failed to persuade their own voters to commit economic suicide by banning fossil fuels, and forget about China, Russia or India. The climate lobby’s fallback, which is starting to emerge, is to punish the foreigners and their own consumers with climate tariffs. Bureaucrats at the European Commission are due to unveil the proposed Carbon Border Adjustment Mechanism (CBAM) later this month… Brussels wants to impose tariffs to bring the cost of carbon-dioxide emissions tied to an imported good into line with what a European producer would pay to produce the same good. …a carbon tariff would impose an enormous burden on companies seeking to sell to the EU—even the low-emitting firms—and as a result probably will trigger a trade war. …Under the leaked plan, foreign firms would have to undertake detailed carbon audits to report emissions to EU regulators, and then would have to work out what proportion of the emissions attributable to goods shipped to the EU already were covered by carbon taxes elsewhere. …The choice between costly compliance or a punitive default tariff risks deterring smaller foreign companies from trying to navigate this system.

Needless to say, the so-called carbon audits will create big openings for cronyism and favoritism.

Lobbyists will be fat and happy while businesses and consumers will get hit with higher costs.

The editorial’s conclusion wisely warns that it would be a big mistake for Europeans to trigger a trade war.

Western elites haven’t convinced their voters to pay the price of their climate obsessions. Like Donald Trump, they now want to blame foreigners. In the process they’ll force their consumers to pay more for imports and domestic goods, and they’ll harm their own exporters if countries retaliate. The last thing the world economy needs as it recovers from a pandemic is a climate-change trade war.

Writing for Forbes, Tilak Doshi speculates whether the United States will copy the Europeans.

…the European Parliament overwhelmingly endorsed the creation of a “carbon border adjustment mechanism” (CBAM) that would shield EU companies against cheaper imports from countries with “weaker” climate policies. …Now that the Biden administration has elevated climate change to its highest priority across the whole of government, it would seem that the EU and the US working together with like-minded governments in Canada and the UK would be in a position to set up a “trans-Atlantic climate club”  and thereby impose a global cost on carbon emissions. …Australian Trade Minister Dan Tehan labelled carbon tariffs “a new form of protectionism.” …For most developing countries, “worries of an increasing carbon footprint generated by economic growth are second to worries that growth many not happen at all.” …What sets off this new protectionism from its predecessors is the sheer scope of its application.

I’m actually hopeful on this issue.

Biden and his team doubtlessly are sympathetic to the E.U.’s initiative, but I don’t think Congress will approve a carbon tax on the American people.

And if the U.S. doesn’t have a carbon tax, there wouldn’t be any reason to impose discriminatory taxes on other nations that also don’t have that levy.

That being said, the Biden Administration would have some leeway to cause problems. For instance, would they push for the World Trade Organization to accept the E.U.’s attack on free trade?

When dealing with politicians, I always hope for the best, but assume the worst.

P.S. Here are my seven reasons to support free trade, as well as my eight questions for protectionists.

P.P.S. You shouldn’t be surprised to learn that the French were early advocates of carbon protectionism.

P.P.P.S. Some American politicians have pushed for regulatory protectionism.

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Democratic Candidates Endorse Huge Tax Hikes on Lower-Income and Middle-Class Taxpayers

I’ve warned (over and over and over again) that supporters of larger government want big tax hikes on ordinary people.

But you don’t have to believe me.

CNN hosted a discussion yesterday with the major Democratic candidates about global warming…oops, I mean climate change…no, sorry, the preferred term is now climate crisis.

Shockingly, something newsworthy actually happened. As reported by the New York Times, most of the candidates expressed support for a big carbon tax that would be especially painful for poor and middle-class taxpayers.

…more than half of the 10 candidates at the forum openly embraced the controversial idea of putting a tax or fee on carbon dioxide… Around the country and the world, opponents have attacked it as an “energy tax” that could raise fuel costs, and it has been considered politically toxic in Washington for nearly a decade. …In addition to proposing $3 trillion in spending on environmental initiatives, Ms. Warren also responded “Yes!” when asked by a moderator, Chris Cuomo, if she would support a carbon tax… Senator Kamala Harris of California, who on Wednesday morning released a plan to put a price on carbon, …calling for outright bans on hydraulic fracturing, or fracking, for oil and gas, and on offshore oil and gas drilling. …Mayor Pete Buttigieg of South Bend, Ind., who also released his climate plan on Wednesday, took the stage declaring his support for a carbon tax… The parade of far-reaching plans on display, ranging in cost from $1.7 trillion to $16.3 trillion… Two other candidates who said they would support carbon pricing, Senator Amy Klobuchar of Minnesota and the former housing secretary Julián Castro.

Interestingly, Crazy Bernie didn’t hop on the bandwagon.

Senator Bernie Sanders of Vermont…is one of the few candidates who has not called for a carbon tax.

In this case, his desire to selectively target upper-income taxpayers presumably is even stronger than his desire to grab more revenue to fund bigger government (and the burden of government would be far bigger under the Green New Deal).

By the way, there was a very interesting admission in the article.

The United States generates almost 25 percent of global economic output, yet our share of carbon emissions is much smaller.

…the United States is the world’s largest historic polluter of greenhouse gases, it today produces about 15 percent of total global emissions.

You would think the climate fanatics would be praising America. But they instead want people to believe the U.S. is worse than Cuba.

Anyhow, let’s return to the main topic of today’s column.

What exactly would it mean for ordinary people if politicians imposed a carbon tax?

The Democrats didn’t offer many specifics last night, so we’ll have to use a proxy estimate. In a column for the Hill, Vance Ginn and Elliott Raia highlight how families would get hit if U.S. politicians followed U.N. suggestions.

…travel…could soon be cost-prohibitive, if the U.N.’s Intergovernmental Panel on Climate Change (IPCC) has its way. …Its recommendation: a carbon tax of as much as $200 per ton of carbon dioxide emissions by 2030 to an astonishing $27,000 per ton by 2100. For America families, this could mean the price of gasoline soaring to $240 per gallon. Remember when we thought $4 per gallon was high? …Regardless of the amount, a carbon tax would…disproportionately hurt the poor and middle class, who pay a higher percentage of their incomes for motor fuel and energy. …Concrete, for example, is perhaps one of the most common carbon-intensive products… At the IPCC rate of $200 per ton of carbon dioxide emissions by 2030, the cost of building with concrete would rapidly rise. …Take a new home of 3,000 square feet. A simple slab foundation (with no basement) could use 100 cubic yards of concrete. Adding a $370 tax per cubic yard for a ton of carbon based on the $200 rate above would mean the cost of that home would likely rise $37,000.

For what it’s worth, the statists at the International Monetary Fund endorsed a $1.40 tax increase on a gallon of gas in America, which was part of a proposal to increases taxes on the average household by more than $5,000.

To be fair, I imagine the Democrats – if ever pressed for specifics – will propose taxes lower than what the U.N. or I.M.F. are suggesting.

That being said, it’s also fair to warn that taxes which start small almost always wind up becoming onerous.

Let’s close with a political observation.

At the risk of stating the obvious, people don’t like being saddled with higher taxes. And, as Sterling Burnett explains, they seem especially hostile to energy-related taxes.

From Alberta to Australia, from Finland to France, and beyond, voters are increasingly showing their displeasure with expensive energy policies imposed by politicians in an inane effort to purportedly fight human-caused climate change. …This is what originally prompted protesters in France to don yellow vests and take to the streets in 2018. They were protesting scheduled increases in fuel taxes, electricity prices, and stricter vehicle emissions controls, which French President Emmanuel Macron had claimed were necessary to meet the country’s greenhouse gas reduction commitments… Also in 2018, in part as a reaction against Canadian Prime Minister Justin Trudeau’s climate policies, global warming skeptic Doug Ford was elected as premier of Ontario, Canada’s most populous province. Ford announced he would end energy taxes imposed by Ontario’s previous premier and would join Saskatchewan’s premier in a legal fight against Trudeau’s federal carbon dioxide tax. …in August 2018, Australian Prime Minister Malcolm Turnbull was forced to resign over carbon dioxide restrictions he had planned… In Finland, …the Finns Party, which made the fight against expensive climate policies the central part of its platform, came out the big winner with the second-highest number of seats in Parliament.

I’ve previously written about taxpayer uprisings in France and Australia.

Perhaps the most relevant data, though, is from the state of Washington. Voters in that left-leaning state rejected a carbon tax in 2018 (after rejecting a different version in 2016).

So maybe Crazy Bernie was being Smart Bernie by not embracing the tax. And Joe Biden also chose not to explicitly back the proposed tax hike.

P.S. The parasitical bureaucrats at the OECD also have endorsed higher energy taxes on the United States.

P.P.S. I don’t have an informed opinion on the degree of man-made warming, but I am highly confident that statists are using the issue to promote bad policies that they can’t get through any other way.

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Carbon Tax Salesmanship: A Case Study of Political Dishonesty

Maybe I’m just old-fashioned, but I don’t believe in using dodgy numbers or nonsensical analysis – even if that would help my side in a policy debate.

And it goes without saying that I also don’t like when the other side is dishonest. But I’m not talking about my left-leaning friends who have genuine (albeit misguided) views on things such as Keynesian economics or the minimum wage.

I’m talking about people who deliberately dissemble and prevaricate in hopes of advancing their policy agenda.

Consider, for instance, the new carbon tax that has been introduced by Congressmen Ted Deutch (D-FL) and Patrick Rooney (R-FL). The core features of the bill are:

• A $15-per-ton carbon tax that increases $10 each subsequent year until it reaches $100.
• A new entitlement program giving money to all legal American residents, including children.
• A new tax on consumers who buy imports from nations without similar taxes on energy usage.
• A supposed adjustment and easing of existing regulations governing carbon emissions.

There’s obviously a serious policy debate to have about both the general concept as well of the individual components of this type of legislation, and I’ve periodically added my two cents to the discussion.

But what irks me is that the sponsoring lawmakers are openly and deliberately lying about a key part of their plan. Here’s the relevant section from their talking points.

The claim about “revenue neutrality” is a stunning level of dishonesty, even by Washington standards.

At the risk of stating the obvious, if the government imposes a tax and then also creates a program to give money to people, that’s not revenue neutrality.

Was Obamacare “revenue neutral” because all the new taxes were balanced out by the handouts and subsidies that the law created for the big insurance companies?

Of course not.

And a new carbon tax doesn’t magically become “revenue neutral” because new revenues are matched by new spending.

To be sure, supporters can argue that their plan is “deficit neutral,” and that would be legitimate (even though I would argue that this wouldn’t be the case in the long run because of the adverse economic impact of new taxes and new spending).

But “revenue neutral” is a bald-faced lie.

The Daily Caller reported on this amazing example of deceptive advertising, citing the good work of Paul Blair of Americans for Tax Reform.

The bipartisan House Climate Solutions Caucus claims it is pushing a “revenue-neutral” carbon tax, but legislation proposed Thursday would hike taxes by at least $1 trillion over the next decade… Florida Reps. Ted Deutch, a Democrat, and Francis Rooney, a Republican, reintroduced a bill Thursday that would place a $15-per-ton tax on carbon emissions in 2019. The tax would rise by $10-a-year increments until it hits nearly $100 per ton. …Though Rooney claims the tax is “revenue-neutral,” the plain text of the bill does not include any reciprocal tax cuts to balance out the burden of the added tax on emissions… “Historically and for anyone engaged in tax policy, the definition of ‘revenue-neutral’ is and always has been if you increase a tax, the amount of revenue it generates must be offset by an equal tax cut elsewhere,” Blair said. …Blair said…that the “apology checks” sent as carbon dividends will be treated as new spending and do not negate a new tax burden.

By the way, just in case anyone thinks I’m imposing some weird, libertarian-ish, meaning to “revenue neutral,” you may want to look at how the left-leaning Tax Policy Center defines the term.

Revenue-neutral. A term applied to tax proposals in which provisions that raise revenues offset provisions that lose revenues so the proposal in total has no net revenue cost or increase.

I often disagree with the folks at the Tax Policy Center, but I’ve never questioned their honesty.

So when we both agree on the definition of ‘revenue neutral,” this is slam-dunk confirmation that it’s preposterously dishonest to count new spending as an offset to a tax increase.

P.S. Some of my friends and allies who supported the Fair Tax sometimes played fast and loose with the truth. That plan would have required the government to send “prebate” checks to households to partly compensate people for the new tax, yet supporters would argue that this expenditure shouldn’t count as a new entitlement program. While my first choice for tax reform is the flat tax, I certainly think a national sales tax would be a far better way to tax than the mess we have today, but that did not justify mischaracterizing the plan.

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