The list of people who both support President Trump’s pro-tariff trade agenda and support a carbon tax isn’t very large. But it may be about to get a little bit larger. Last week, at the National Conservatism conference put on by the Edmund Burke Foundation, tech billionaire Peter Thiel tied the two issues together during the course of remarks about the dangers of growing Chinese economic dominance:
Even from outer space you could see that China is sort of an unusually dirty country that’s dirtying up the whole planet. And maybe we should reframe the 25 percent tariffs as a carbon tax. And if we reframe it as a carbon tax on the country that’s dirtying up the planet, maybe the 25 percent is a floor, not a ceiling.
Thiel’s comments were a bit tongue-in-cheek—he’s previously expressed skepticism about climate action—but it did make me wonder how workable such an idea might be. Could the U.S. put a tax on imports based on the greenhouse gas emissions associated with their production? And if so, would that actually reduce emissions?
When you read statistics about the levels of greenhouse gas emissions by country, these are typically based on what is produced within a country. However, nearly a quarter of global carbon dioxide emissions come from the production of goods that are ultimately consumed in another country. A carbon tax on imports thus has the potential to affect emissions beyond the borders of the country imposing the tax.
One big, practical question is whether such climate tariffs would be compliant with America’s obligations under the WTO. This probably would not be an issue if the U.S. were to impose a carbon tax on imports in conjunction with pricing on domestic production. Simply taxing imports, by contrast, would be more problematic.
Nevertheless, Thiel isn’t the only person who seems to be thinking along these lines. In a recent speech, French President Emanuel Macron alluded to the possibility of the European Union taxing imports from countries like America that do not have their own pricing system for greenhouse gas emissions. He called the measure a “carbon tax on borders.” Thiel’s idea may therefore end up having a practical relevance sooner than we might think, though not quite in the way he suggested.