Carbon Tariffs Update: India Talks Even Tougher; White House Doesn't Care

Bridges weekly reports that India is not playing around on carbon tariffs:

India will bring a WTO challenge against any “carbon taxes” that rich countries impose on Indian imports, Indian Environment Minister Jairam Ramesh said this week.

“If they impose such a tax, we will take them to the WTO dispute settlement forum,” the minister told The Hindu Business Line, an Indian daily newspaper. “We will deal [with this] through hard negotiations. Such barriers are not going to be WTO-compatible and we will fight it.”

No such measures have been implemented, but politicians in both the United States and the European Union have discussed the possibility of imposing tariffs or other forms of “border carbon adjustment” on goods imported from countries with laxer regulations on greenhouse gas emissions. Buzz around the idea - widely known as a “carbon tax” - has grown since December’s climate conference in Copenhagen failed to produce a global deal to reduce emissions of heat-trapping gases. Proponents say that the measures could help level the playing field for firms and industries based in countries with strict climate regulations.

A form of border carbon adjustment was written into the climate legislation passed by the US House of Representatives last summer. US President Barack Obama criticised the measures, warning of the dangers of “sending any protectionist signals” amid the economic downturn. The Senate has yet to vote on its version of the bill.

European heads of state reportedly remain divided over whether the 27-nation bloc should impose a carbon tax at EU borders. At a recent summit of European leaders, Austrian Cancellor Werner Faymann argued that “it wouldn’t be a good negotiating tactic,” Agence-France Presse reported. But French President Nicolas Sarkozy is an ardent supporter of the measures. Sarkozy told journalists last week that European Commission President Jose Manual Barroso will put forward a proposal for a European carbon border tax in June.

But many in Europe remain unconvinced. Speaking to journalists earlier this month, Connie Hedegaard, the European Commissioner for Climate Action, cautioned against the unilateral measures. If we trust other countries’ pledges to take action to limit climate change, then “it should not be the time to say, OK, but we just give you a carbon tax. Why not now make an effort to try to conclude the international deal?” Hedegaard said, according to a report from Dow Jones.

Now, I've discussed the Indians' very serious efforts and strong words on carbon tariffs over the last few months, as well as my thoughts that the EU's carbon tariff ambitions appear dead for now (despite the glimmer of "optimism" that Bridges reports above). 

The United States, however, is worth keeping an eye on in the coming months.  And that's a bit of a surprise.

As mentioned last week, a bi-partisan group of US Senators is planning to unveil in the next few weeks new climate change legislation that will include, among other things, carbon tariffs.  I said at that time that the legislation's chances of passage this year were nil, but President Obama's big announcement today that he's going to (eventually) open a few areas of US coastline to offshore oil and gas exploration raises those odds from 1,000,000:1 to, say 1,000:1 because it indicates that (i) the White House is going to put a lot of effort into moving climate change legislation this year; and (ii) they're going to "reach across the aisle" - or at least try to appear like they are - in an attempt to score a few GOP votes (paging Olympia Snowe!).  I still think that the new "bi-partisan" legislation, with its controversial carbon tariff provisions, isn't going anywhere in this year, given the absolute drubbing that Democrats are already facing in the mid-term elections, but hey, in politics you never, ever know for sure.

So stay tuned, folks.