A new climate tax for the US?

(Foto: Anne Karin Sæther/Bellona)

Publish date: September 21, 2008

Written by: Anne Karin Sæther

EU Trade Commissioner Peter Mandelson and Bellona President Frederic Hauge met in a debate in Oslo Thursday to discuss whether the the United States and other countries should be punished with a carbon border tax if they don’t sign on to a new climate deal.

The delegation of the European Commission in Oslo Thursday hosted a debate on free trade and climate policy. The panel included EU Trade Commissioner Peter Mandelson, Norwegian Foreign Affairs Minister Jonas Gahr Støre, Director General of The NHO (Confederation of Norwegian Enterprise), Finn Bergesen, and Bellona’s Frederic Hauge.

All were in agreement that the world community must agree on a new and better international climate deal at the United Nations Framework Convention on Climate Change (UNFCCC) meeting in Copenhagen next year. Countries like the United States and China – the world’s two largest polluters – must be part of a new deal. Today the US has not ratified the Kyoto Protocol, whereas India and China have ratified without any binding commitments.

But none of those gathered at the debate were 100 per cent convinced that the negotiators will reach a new an all-onboard-deal next year.

"Success in Copenhagen is possible, but difficult. We need an insurance policy, a fall back position," said the Mandelson.

In the debate after he had held his speech, the commissioner couldn’t really say what such an insurance structure could contain or what the alternative to an all-onboard-deal could be.

Mandelson doesn’t want to wield the threat of a possible carbon border tax, although the European Commission has decided to conduct a study on such a tax. The Commission has recognised the potential risks of "free riders" – those countries that don’t sign up for a climate deal, and therefore don’t bear the burden of competitiveness costs of paying for the carbon they emit.

"In Canada, who doesn’t have a brilliant record on this matter, I hear people in government say that ’Oops, if we don’t sign a deal, we might be punished with borders adjustments,’" said Mandelson.

"That is an argument, but on the other hand, this insecurity may work in Canada, but not in a lot of other places, where it may be seen as blackmailing and an incentive to disengage further," he said.

He listed other concerns as well: that measures would be difficult to administer and enforce, problems with making it World Trade Organisation (WTO) compatible, and the risk of inviting retaliation and provoking a negative spiral of protectionism under the pretext of environmental protection.

No quick fix
In his speech, Foreign Minister Gahr Støre also expressed opposition to a new carbon border tax, and the NHO Director General Bergesen, joined him. They both emphasized the need for negotiations and incentives rather than threats of coercion.

"We cannot be simplistic. Look at the Olympics in China. What happens if you boycott? It would probably feel good for yourself, but what happens on the other side of the door? What happens with those behind the closed door?," said Gahr Støre.

"I am more pro incentives than punity measures. They could probably just lead to a leakage somewhere else. I am skeptical to a quick fix," he said.

Holding one’s cards close to one’s chest
Bellona’s Hauge was the only one in the panel who didn’t amortize a new carbon border tax. Bellona believes that border tax adjustments can be a persuasive tool in the ongoing climate negotiations, and that a tax should be considered as a fallback position.

"Perhaps this will be the ammunition that works best if you don’t use it. It is important not to let go of this card before the negotiations in Poznan and Copenhagen," said Hauge.

He’s positive to the study the European Commission has decided to carry out to examine a potential use of borders adjustments.

Sarkozy and Navarsete support tax

Although the opposition against a cross border tax was evident during Thursday’s meeting in Oslo, there are different views within the European Union. France’s President, Nicolas Sarkozy, is among those who support the idea of the tax.

In Norway, the leader of the co-ruling Centre Party, Liv Signe Navarsete, recently told the Norwegian daily Dagsavisen that she was in favor of the tax.

Navarsete pointed out the existing tax for countries not taking part in the international trade agreements, and she request a similar solution for those countries who won’t sign a new climate deal.

"It’s a paradox that we don’t have a similar system to punish countries who don’t want to take on responsibility for climate change. After all it’s more important to prevent further global warming," she told the paper.

Can the United States change the game?

At the end of the debate on Thursday, Gahr Støre, pointed to the possibility of the US drastically changing the ongoing climate talks.

"What if the US went ahead, instead of just following? A new administration can perhaps do that," he said.

"It is a blame game. Perhaps the US can change the game. Americans are good at that".