Capping CO2 emissions unilaterally shouldn’t trouble your economy too much

Leveling the Carbon Playing FieldThe current issue of the Economist (June 21st 2008) has an excellent article in Economic focus on the question of “carbon tariffs”. Apparently there has been very little study so far on the effects of introducing emission caps unilaterally in certain developed countries. Based on a first study by the MIT and a book by the Peterson Institute for International Economics the Economist article argues that there are (only) neglectable effects on a country like the US if it introduces CO2 capping systems without China and other emitters following on equal footing.

According to the analysis only few industries would be affected (metals, paper, chemicals, cement) and here either the share of energy costs is very little or all of its production can be sold at world markets due to production shortages in any case. But read the well-written article for the full argument.

I am very happy to read that first studies hint in this direction because it is high time to move forward in CO2 capping – both in the US and the EU. Secondly, I haven’t yet heard of any reasonable system that would be a fair way of calculating eventual carbon tariffs. So, luckily the economic evidence suggests that we can stop thinking about it and focus our efforts on convincing the US to finally introduce a cap-and-trade system.

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