Sunday, July 5, 2009

Carbon Tariffs

Whenever people with as diverse opinions as Tyler Cowen and Matt Yglesias agree on something for essentially the same reason, I'm strongly inclined to favor whatever they do. Their argument in regards to the carbon tariffs included in Waxman-Markey is basically that if we slap them on to even out the costs of cap and trade levied on domestic and foreign industries, we anger the international community (importantly China, the EU and India). They argue it weakens our position in international negotiations to reduce green house gasses, and may cause inaction and angry foreign governments. For the most part, I agree with their reasoning. Without major action and international consensus, there will be little impact on climate change even if we significantly reduce our carbon output. In addition to the impact on green house gases and the effect on our economy, any climate change bill should be analyzed to see if it helps our hand in international negotiations. Waxman-Markey will likely only slightly reduce our carbon input and will impose a tax at a time when our economy is already very weak. Some proponents of it recognized its weaknesses while the bill was still in committee. They told us something was better than nothing and it would help us on convince other nations to reduces their carbon usage. I was not a big fan of the logic before the carbon tariffs, since weakening our economy at this time while not reducing our carbon usage by much is a tough price for better standing internationally. Now, the whole better standing thing is no longer there and thus do not support Waxman-Markey. I could see how after going through the traditional international negotiation steps adding threatening a tariff may be a needed tactic, but right now, let's do the rational thing and keep our options open.

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