How Europe’s new carbon tax on imported goods will change global trade

The new regulation arrives on New Year's Day.

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[academic.sam]

Great! Finally something that may ha a real chance at incentivizing climate friendly manufacturing practices!

I'm really curious about how this will affect goods from US and how the current IiC (infant in charge) will react. By react, I mean throwing a tantrum.

With the anti-green policies sweeping through US, this will be a real issue for US exports

 

[JanneM]

As always, the implementation details matter a lot for how well it will work. But overall it's a really good idea.

It would possibly even be tempting use a similar mechanism for other cross-border issues. Add an import fee based on the relative salaries and working conditions of the people producing the goods for instance. But that'd be a lot more difficult to define in an unambiguous way that achieves the desired effect. How would you weigh relative salary level versus weeks of paid vacation, versus paternity leave, versus health care access...

 

[ChosenName]

Taxing goods produced using "dirty" power can only be a good thing in the long run, add transportation emissions into that and it's possible that locally produced goods may become a more attractive option to consumers.

 

[Shiunbird]

I am cautiously optimistic about this.

If we start paying a price closer to the full lifecycle of things, from extraction of raw materials to an adequate disposal of the obsolete/retired product, perhaps we will see less of glued irreplaceable batteries, longer software support cycles for hardware, products that are easier to repair, more optimized software, better food production processes, etc.

 

[85mm]

This is an actual market based approach. Unfortunately too many people don't realise that you can have well regulated functional market solutions, or at least like to pretend the choice is either lase-fair capitalism or communism.

 

[CanardDeCourse]

It is incredibly sad that Washington has decided that burning the planet to buy more golden toilets is the way to go. If the EU and the US had been united in this a real change could have been made. But still, better than nothing I guess.

 

[Jerommeke]

As I understand it, a countries goods can be taxed at the border by the EU when exporting to the EU or it can tax their goods themselves and (claim to) use that income to compensate for the goods’ CO2 emissions?

That’s a great incentive for every country: pay the eu or pay yourself

 

[Steve austin]

Great! Finally something that may ha a real chance at incentivizing climate friendly manufacturing practices!

I'm really curious about how this will affect goods from US and how the current IiC (infant in charge) will react. By react, I mean throwing a tantrum.

With the anti-green policies sweeping through US, this will be a real issue for US exports

Of course he will. “Tariff is my favorite word” works only for him - he takes it as a personal attack if any other country imposes tariffs, whether in response to the ones he imposed or for other reasons. And a tariffs imposed against fossil fuel use? That’ll really set him off.

 

[Lil' ol' me]

Of course he will. “Tariff is my favorite word” works only for him - he takes it as a personal attack if any other country imposes tariffs, whether in response to the ones he imposed or for other reasons. And a tariffs imposed against fossil fuel use? That’ll really set him off.

What the EU is doing is brilliant. It's like a tariff, but they are using the money to help companies and residents adapt & afford this.

What is the US doing with all its tariff income?

crickets

 

[vvax56nM]

Currently, goods are cheap and labor is expensive. It should be the other way around. It would mean that repairing things becomes interesting again. Recycling becomes more important. I believe even jobsatisfaction would increase as you are no longer the biggest cost and the pressure on you drops. Need an extra pair of hands? Sure. Of course there are obvious disadvantages.
Looks like we are slowly moving more in that direction.

Cheap labor and expensive goods would mean that no one except the rich would be able to afford anything. Which would mean that the economy craters. How would that help anyone?

 

[ChosenName]

What is the US doing with all its tariff income?

It seems as if the US is using tariff income to make up the shortfall in adequate taxation of those who tend to make significant donations to support the party of Government....

 

[Perdidit in nubibus]

Russia's special military operation in Ukraine.

Off topic, I know, but…

You could have the best arguments in the world, but this framing of the totally unacceptable, unwarranted and vicious invasion of The Ukraine, and subsequent war that Putin continues to wage against a peaceful neighbor, pretty much negates anything else you had to say.

It’s an invasion by a hostile force. Pure and simple.

The only times I hear it called a “Special Military Operation” is by Russians in favor of continuing the desires of Putin to grab more land for himself.

Edit: grammer

 

[vvax56nM]

You do not need all that stuff. We will be fine. Economy be damned. We're acting like addicts.

You know food and medicine are part of "goods", right? We will very much not be fine without them.

 

[Louis XVI]

You do not need all that stuff. We will be fine. Economy be damned. We're acting like addicts.

it’s always easy to tell other people they don’t need stuff. Will you be volunteering for a pay cut now?

 

[paulfdietz]

In the old world of free trade, this would have been harder. But now free trade is dead, so there's no impediment. Thanks Trump, although I'm sure that's not what he intended.

 

[Mad Klingon]

I suspect the lifespan of this will depend on how much it causes prices to increase. A rise of 2~5% will probably be accepted. If stuff the average person buys suddenly becomes 30% more expensive, the next election cycle will probably be rather brutal toward incumbents, followed by a quick repeal.

 

[RichyRoo]

If only this has been implemented at the same time as the EU carbon tax.Talk about shutting the gate after carbon intensive manufacturing has bolted!

And the difference between this import tax and the tariffs, is that companies can avoid these by using low carbon manufacturing techniques and low carbon energy, or by implementing a carbon tax if their own. It's actually an equalisation tarrif.

 

[piotrek54321]

I think it would've been ideal to introduce it alongside the ETS to limit the local industry escaping emissions control but well, better late than never.

I'm surprised that China is seemingly against it. They're probably in the best position to limit their manufacturing emissions over the coming years, perhaps better than the EU itself.

 

[My_Jacket]

Cheap labor and expensive goods would mean that no one except the rich would be able to afford anything. Which would mean that the economy craters. How would that help anyone?

Well first you destroy trust, knowledge and institutions. Then you completely distort the market so that not even the person who baked your bread can afford to both live and to work at the same time.

With this basic strategy, you can quite simply press onwards, ensuring the filthy peasants have nothing to eat other than leaves and rocks.

Then you realise that all of those squillions of dollars you made by dropping your boot down on top of Average Citizen's head is nigh but worthless. You've cratered the markets. You've destroyed institutions. You've ensured that the labour market (what's left of it) is now barely held together by tape and string. You've isolated yourself behind walls of money, greed, and xenophobia. Nobody is coming to help you.

As you gaze upon the smoking ruins that were once the wildest moments of end stage capitalism, you wonder why it is that you can't keep throwing your squillions of dollars, saying "I want this now!". That old trick has grown tiresome; Average Citizen and their peers have finally had enough. And with all the self awareness and street-smarts of a wet jug, you go in search of another one of Average Citizen's appendages to stomp on to make things feel better again.

And that my friends, is how you keep winning at life... Or at least that's what I've been lead to believe by observing some of the richest and most powerful people around. Makes perfect sense really....

 

[quantum meruit]

What is the significance of the EU implementing this policy without there being corresponding policies in China, the U.S., etc.? Does the cost of living and doing business increase in Europe compared to other developed economies? This isn’t meant as criticism. Europe is trying to do the right thing, but it could be like a prisoner’s dilemma where the bad guy cheats and takes advantage of the good guy’s decision.

 

[Madestjohn]

It seems as if the US is using tariff income to make up the shortfall in adequate taxation of those who tend to make significant donations to support the party of Government....

They attempting to spin the tariffs that way..
(In fact claiming ‘In the future NO Income tax!’)

In truth the actual numbers are no where close to balancing current tax cuts

 

[My_Jacket]

A pay cut would not change my way of life. We already live rather simple. To the point that we no longer know what to do with our money.
My grandfather was a farmer. He owned a lot of land, and prospered. He also lived a very simple life. When he got too old, they installed central heating in his century old house. He did not wanted it but my aunts and uncles could not bare seeing him sitting next too the wood stove. It ran for a week. The stove was lit up again and he died next to it a decade or two later.
We are all addicts. We will cry and shout when our drug is cut off. It will take a while, but you'll learn to appreciate the small stuff again. Like the heat of the wood stove after a cold day outside.

Wow. Are you almost nearly complaining about having too much money".

I understand the sentiment and where you're coming from.. but Christ alive read the room. Cost of living is skyrocketing. Wages are stagnant and far behind inflation. More and more people continue to live pay to pay, never able to save enough money to get themselves in the position you find yourself in. And by the sounds of it, you were able you get there with intergenerational wealth.

Hell, I'm over the moon wherever I find loose change! Due to a confluence of reasons (primarily various chronic health issues) I can no longer work. ... What I would give to have some form of disposable income these days... So if you've got more money than you know what to do with, start donating to worthwhile causes. Or you know, send some of it my way.

/rant

 

[sivingen]

So, a tariff essentially?

Correct. But in contrast to Trump nilly-willy tariffs made in anger while texting random social media posts, CBAM is a well thought through fair mechanism, advertised up front in years, intended to make the world a better place.

The pity is that EU did not do this from the start when introducing CO2 taxes.

 

[tsl]

Right now this only applies to industrially constructed materials.

If the expand the policy to manufactured goods, it will be extremely difficult for small companies to deal with it. My company makes low-volume specialty electronic devices, and the components come from all over the world. Just dealing with potential conflict minerals in components is already a lot of bureaucratic overhead. As an example, you have to identify the forge that provided the tantalum incorporated into each part. Even a relatively simple device that we make has hundreds to thousands of individual components.

 

[JanneM]

Right now this only applies to industrially constructed materials.

If the expand the policy to manufactured goods, it will be extremely difficult for small companies to deal with it. My company makes low-volume specialty electronic devices, and the components come from all over the world. Just dealing with potential conflict minerals in components is already a lot of bureaucratic overhead. As an example, you have to identify the forge that provided the tantalum incorporated into each part. Even a relatively simple device that we make has hundreds to thousands of individual components.

You're already dealing with it for other materials and component legislation. You ask your suppliers to provide you the documentation you need as a precondition of your orders. You - and they - have had years and years to prepare already; I'm sure you'll be fine.

 

[KingKrayola]

Off topic, I know, but…

You could have the best arguments in the world, but this framing of the totally unacceptable, unwarranted and vicious invasion of The Ukraine, and subsequent war that Putin continues to wage against a peaceful neighbor, pretty much negates anything else you had to say.

It’s an invasion by a hostile force. Pure and simple.

The only times I hear it called a “Special Military Operation” is by Russians in favor of continuing the desires of Putin to grab more land for himself.

Edit: grammer

To be fair, losing the useful chunk of one's navy in what is basically a land war is pretty special…

On topic, this is a pretty good policy. I've been seeing carbon accounting software start to arrive for UK small businesses and I think there is appetite for this kind of equalising.

 

[paulfdietz]

So what is europe actually doing with this money? Unless its going to clean up the polluting countries (unlikely), its not gonna fix anything except make stuff more expensive. EU is already pushing itself internally, so this extra new tax isnt gonna do much other than continue internally to clean up. The problem though isnt inside the EU, its outside.

The argument with Pigouvian taxes (or tariffs) is you want to penalize things you don't want, instead of penalizing things you do want (like people earning incomes).

 

[Eng_wkzm]

You do not need all that stuff. We will be fine. Economy be damned. We're acting like addicts.

I need all that stuff. I like stuff.

 

[DDopson]

A pay cut would not change my way of life. We already live rather simple. To the point that we no longer know what to do with our money.
My grandfather was a farmer. He owned a lot of land, and prospered. He also lived a very simple life. When he got too old, they installed central heating in his century old house. He did not wanted it but my aunts and uncles could not bare seeing him sitting next too the wood stove. It ran for a week. The stove was lit up again and he died next to it a decade or two later.
We are all addicts. We will cry and shout when our drug is cut off. It will take a while, but you'll learn to appreciate the small stuff again. Like the heat of the wood stove after a cold day outside.

I do love myself a good wood stove, but this is hardly the example of “progress” that you think it is. A traditional wood stove is inefficient at converting chemical energy to useful heat and if we ran our society on wood stoves at scale, we would a) run out of trees to burn, b) suffer grievously from particulate air pollution, smog, etc.

I’ve been to towns in New Zealand where wood stove heating is very common and when I tried to go running in the morning, the air was acrid in my lungs due to all the woodsmoke. A light whiff of woodsmoke is a pleasant and nostalgic winter experience. 150 houses in the same town using wood heating continuously is a bit too much. Converting a large city to wood heating would create a public health disaster.

Also, what’s one of the most significant sources of deforestation pressure? Charcoal production for cooking and heating in developing countries. For example, this study (https://www.mdpi.com/2072-4292/14/14/3352) of charcoal production in Zambia asserts that 55% of all logged wood is burned for fuel. This is exacerbated by low tech traditional charcoal producers preferentially felling old growth hardwoods and inefficiently converting them to smaller volumes of charcoal than would be produced in an industrial charcoal operation, meaning that they have to log more acres of forest to satisfy demand. Trees are only a renewable resource if they are replanted and harvested at a sustainable pace, and most countries with large scale charcoal production have problems with unsustainable deforestation.

Low tech is often paradoxically more resource intensive and environmentally destructive than high tech. For example, we drove whales to the brink of extinction in search of clean burning lamp oil, and then the kerosene that displaced most uses of whale oil was less short term destructive but was burning a fossil resource, but then that was displaced by light bulbs that produced far more light per watt of energy burned (even after accounting for electrical conversion and distribution losses), then incandescents were replaced by LEDs, buying yet another order of magnitude improvement in energy efficiency, powered by growing fractions of renewable electricity. Solar + batteries + LED is cheaper than buying kerosene, which is why solar lanterns are popular in many parts of Africa. Such devices have a one time energy input for manufacturing but then don’t consume any trees or kerosene or other fuels on an ongoing basis, paying back the energy investment in their manufacturing many times over.

This planet has far more humans than can be sustained via the low-tech lifestyles that predominated when the global population was a tiny fraction of what it is today. Billions of humans living a low-tech lifestyle would strip the planet bare.