Anti-Neocons Forum

If President Barack Obama wants to stop the descent toward dangerous global climate change, and avoid the trade anarchy that current approaches to this problem will invite, he should take Al Gore’s proposal for a carbon tax and make it global. A tax on CO2 emissions — not a cap-and-trade system — offers the best prospect of meaningfully engaging China and the U.S., while avoiding the prospect of unhinged environmental protectionism.

Cap-and-traders assume, without much justification, that one country can put a price on carbon emissions while another doesn’t without affecting trade or investment decisions. This is a bad assumption, given false comfort by the Montreal Protocol treaty, which took this approach to successfully rein in ozone-depleting gases. Chlorofluorocarbons are not pervasive like greenhouse gases (GHGs); nor was the economy of 1987 hyperglobalized like ours today.

Good intentions to limit big polluters in some countries but not others will turn any meaningful cap into Swiss cheese. It can be avoided by relocating existing and new production of various kinds of CO2-emitting industries to jurisdictions with no or virtually no limits. This is known as carbon leakage, and it leads to trade anarchy.

How? The most advanced piece of climate legislation at the moment, the Lieberman-Warner Climate Security Act, contains provisions for retaliatory action to be taken against imports from carbon free-riding nations. Married with the current economic malaise, the temptation to slide into a righteous but runaway environmental protectionism — which Washington’s K Street lobbyists would be only too happy to grease — would almost certainly lead to a collapse of the multilateral trading system. This scenario was presented to the world’s trade ministers last December at the United Nations climate talks in Bali by David Runnalls of the International Institute for Sustainable Development.