The COP26 climate summit in Glasgow is almost done and dusted, with some ambitious commitments and breakthroughs from governments and companies to tackle the climate disaster more aggressively. But while there seems to be broad agreement about what must be done to prevent the planet from getting hotter – such as reaching net zero emissions in the coming decades – major disagreements remain how to subtract it.
As countries try to green jobs while boosting exports to keep foreign money flowing in, reliance on protectionist economic policies is becoming an increasing point of friction between governments. Here are two juicy examples where this dynamic plays out.
The US is messing with Mexico and Canada about cars. The Biden administration has united Mexico and Canada in anger over its proposal to roll out financial incentives for Americans to buy US-made electric vehicles, with additional tax credits for buying a car with a US-made battery or battery. in a union factory. Some American political nerds weren’t at all surprised given Biden’s years of bona fides as a pro-union fighter.
However, Ottawa was shocked and is now outraged, calling it a protectionist move that will encourage automakers to build electric vehicle plants in the US rather than Canada. That’s a huge deal, as the auto industry is one of Canada’s largest manufacturing sectors, contributing more than $12.5 billion to GDP in 2020. key car industry for electric models, which is central to Mexico’s overall strategy for combating climate change.
Mexico City and Ottawa have accused Washington of violating the USMCA – a NAFTA replacement that was painstaking to negotiate – which was supposed to ensure a level playing field for the three countries. Canada and Mexico could now bring a case under the pact’s dispute settlements.
The most exclusive club in Europe: carbon. The European Union, which has made some of the most ambitious climate pledges in the world to date, has proposed a carbon tax on specific imports entering the bloc, including steel, fertilizer, oil and cement. Brussels essentially wants to impose carbon taxes so that foreign producers have the same financial burden as European manufacturers when making similar products.
By putting a price on carbon emissions – and forcing EU-dependent economies to pay or lose big business – the European Commission has devised a way to pay, at least in part, for its very expensive Green Deal.
What’s more, some countries are up in arms that Brussels has urged wealthy, like-minded countries to join the carbon pricing system in exchange for access to the EU’s internal market, excluding tariffs and quotas already in place for others. goods. (Canada is now investigating its own scheme). Critics say it is discriminatory to set up a “transatlantic climate club” — where all states would impose either a border tax on CO2 or an equivalent emissions trading system —: Australian coal-loving Prime Minister Scott Morrison, for example, said the pressure is “trading.” just protectionism under another name.” Meanwhile, Brazil, South Africa, China and India have also complained that a far-reaching carbon border tax would be a “trade barrier”, unfairly penalizing developing countries that still rely on fossil fuels to grow their economies.
While the EU has pulled back in recent months — giving countries five years to get their climate priorities under control — the US has not ruled out imposing tit-for-tat tariffs if Brussels imposes carbon taxes on American goods. Meanwhile, countries like China, Russia and Turkey – which are on the brink of losing a lot of an EU carbon tax — have accused Brussels of violating international trade principles.
What now? Some climate policy proponents are concerned that the use of coercive means such as tariffs and tax credits could backfire, giving ammunition to the naysayers who believe climate policies lead to bad economies.
Will global efforts to protect the planet ultimately thwart national efforts to protect particular industries?