The COP26 climate summit in Glasgow is almost over and dusted off, with ambitious commitments and strides from governments and businesses to tackle the climate catastrophe more aggressively. Yet although there appears to be broad agreement on What must be done to prevent the planet from getting hotter – such as reaching net zero emissions over the next few decades – big disagreements remain over How? ‘Or’ What to remove it.
As countries attempt to make jobs green while boosting exports to maintain foreign cash flow, the resort to protectionist economic policies is becoming a growing point of friction between governments. Here are two juicy examples where that dynamic plays out.
The United States is arguing with Mexico and Canada over cars. The Biden administration has united Mexico and Canada in anger over its proposal to roll out financial incentives for Americans to buy electric vehicles made in the United States, with additional tax credits for the purchase of a car with an American-made or unionized factory-made battery. Some American political nerds weren’t at all surprised given Biden’s good faith as a pro-union warrior.
Ottawa, however, was shocked and is now furious, calling it a protectionist move that will encourage automakers to build electric vehicle factories in the United States rather than Canada. It’s a huge deal because the auto industry is one of Canada’s largest manufacturing sectors, contributing over $ 12.5 billion to its GDP in 2020. Mexico, for its part, is also pissed off. , saying the US proposal undermines its plans to transition the crucial auto industry to electric models, which is at the heart of Mexico’s overall climate change mitigation strategy.
Mexico City and Ottawa accused Washington of violating the USMCA – a NAFTA replacement that was laborious to negotiate – which was supposed to ensure a level playing field for the three countries. Canada and Mexico could now file complaints under the pact’s dispute settlement mechanisms.
The most exclusive club in Europe: carbon. The European Union, which has made some of the world’s most ambitious climate commitments to date, has proposed a carbon tax on specific imports entering the bloc, including steel, fertilizers, oil and cement. Essentially, Brussels wants to impose carbon tariffs so that foreign producers are subject to the same financial burdens as European manufacturers when making similar products.
Indeed, by putting a price on carbon emissions – and forcing EU-dependent economies to pay or lose large companies – the European Commission has found a way to pay, at least in part, its dearly dear. Green Deal.
In addition, some countries are outraged that Brussels has pushed like-minded rich countries to join its carbon pricing system in exchange for access to the EU’s single market, excluding tariffs and tariffs. quotas already in place for other goods. (Canada is currently studying its own project). Critics say setting up a “transatlantic climate club” – in which all states impose either a border carbon tax or an equivalent emissions trading scheme – is discriminatory: Australian Prime Minister Coal-loving Scott Morrison, for example, said the push is “just trade protectionism by another name”. Meanwhile, Brazil, South Africa, China and India have also complained that a large-scale carbon border tax would constitute a “trade barrier”, unfairly penalizing developing countries that still depend on it. fossil fuels to develop their economy.
While the EU has pulled back a bit in recent months – giving countries five years to control their climate priorities – the US has not ruled out imposing tariffs if Brussels imposes carbon taxes on American products. Meanwhile, countries like China, Russia and Turkey, which stand to lose a lot of an EU carbon tax – accused Brussels of violating the principles of international trade.
And now? Some climate policy advocates fear that the use of coercive tools like tariffs and tax credits will backfire, giving ammunition to opponents who think climate policy is bad for the economy.
In the end, will global efforts to protect the planet fail over national efforts to protect certain industries?