- Institute For Energy Research - JULY 20, 2021 - Alexander Stevens - GELLER REPORT -
Democratic lawmakers have devised a plan to impose a border tax on imported goods that is based on the exporting countries’ greenhouse gas emissions. Although details are scarce, the New York Times ran an article Monday which provides a broad outline of the border tax explaining that it would “require companies that want to sell steel, iron, and other goods to the United States to pay a price for every ton of carbon dioxide that is emitted during their manufacturing processes. If countries can’t or won’t do that, the United States could impose its own price.”
This proposal follows a similar plan that came out of the European Union last week. As the Wall Street Journal’s editorial board explained, under that 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. If a company isn’t able to complete such complex and expensive calculations, its carbon tariff will be estimated on the basis of the emissions of the dirtiest 10% of European producers for the same good.”
Over at Reason Magazine, Eric Boehm has a good summary of why carbon border taxes aren’t a good idea. In short, these taxes would raise prices on imported goods, hurting low-income and middle-class consumers of those products. As my colleague Jordan McGillis explains at the American Spectator:
Democrats will try to sell this new tax as a way to save American jobs, but as has long been understood, tariffs deliver concentrated economic benefits to the powerful incumbents who lobby for them while spreading new costs across the wider population. Far from being an economically just approach, the carbon border tax would further enrich existing companies while taxing American households.
Furthermore, these taxes will expand the federal bureaucracy to a point where the whole project is likely to devolve into cronyism. As economist Dan Mitchell explains:
It’s always a bad idea to give politicians a new source of revenue. But it’s a worse idea to give them a new source of revenue that will require bureaucrats to measure the amount of carbon produced by every imported good. As I pointed out a few days ago when discussing the European Union’s version of this protectionist scheme, that’s a huge recipe for cronyism and favoritism.
And as the WSJ’s editorial page pointed out when discussing the EU’s plan for carbon border taxes, these taxes are likely to lead to retaliation from trade partners and pushback at the World Trade Organization.
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