There is a real danger that the world’s first carbon tariffs could be added to the $3.5 trillion spending bill making its way through Congress. If enacted, these tariffs would tax goods imported from countries that do not have the same environmental standards on carbon emissions as the United States. They are bound to impose huge costs on the economy — but for no environmental benefit.
The timing is terrible. Inflation is at its highest level since the 2008 financial crisis. The previous administration already enacted tariffs on hundreds of billions of dollars of goods, and then the COVID-19 pandemic disrupted supply networks that are still adapting. Altogether, that’s caused record prices for goods such as houses and cars.
According to Democrats’ tariff plan, which emerged this week, roughly an eighth of U.S. imports would be taxed beginning in 2024,reportsthe New York Times. The tariff rates are meant to mimic what domestic producers pay to comply with U.S. environmental regulations. These numbers are subjective and difficult to calculate — which is music to lobbyists’ ears.
Affected goods would include oil, natural gas, coal, iron, steel, aluminum, and concrete — materials that go into making cars and houses, which are already at record-high prices. But other domestic industries, from lumber to agriculture, will likely spend significant sums lobbying to be included in the tariffs. Many steel and aluminum imports already face tariffs of 25% and 10%, respectively, so the carbon tariffs would be redundant at best.
The Democratic leadership’s carbon tax proposal closely matches a European Union proposal released last week. In public policy, “be more like Europe” is usually a bad idea. Government-directed economic policies, however well-intentioned, drive the region’s chronically high unemployment, slower growth, and reduced entrepreneurship compared to the U.S. While American economic policies have plenty of room for improvement, copying Europe will not help the recovery or the environment.
How much warming would a carbon tariff prevent, assuming it works as intended? The amount would literally be too small to measure. Even normal year-to-year temperature variations are orders of magnitude higher than what a carbon tariff’s greatest possible effect would be.
The hit on people’s pocketbooks would be more obvious. Tariffs reduce competition. When domestic producers can hide behind a tariff shield, they usually raise their prices, as steel producers did when former President Donald Trump enacted his steel tariffs.
Tariffs also disrupt supply chains and create shortages, like the one we are now experiencing with semiconductors, which are used in the manufacture of countless electronic devices.
This is all bad news for people already stretching their dollars due to inflation.
So, carbon tariffs would hurt the economy and fail to achieve their goal. But are they good politics? Likely not. The Gallup polling company has a long-running monthly poll that asks people what they think is the most important problem facing the country. In a typical month, 2% to 3% of respondents choose environment/pollution/climate as their top problem.
Carbon tariffs are not the kind of pocketbook issue most voters have in mind because the environment, in its current state, is a lower priority. Voters care by much larger margins about poor government leadership (22% in June), the economy (9%), and COVID-19 (8%, down from 33% in January). People care about what affects their lives most directly. If Congress wants to help people and respond to voter concerns, it should focus on recovery issues such as vaccination, regulatory reform, and keeping inflation in check.
Read the full article at the Washington Examiner.