Energy

A Carbon Border Tax Hurts the Economy and Won’t Help the Environment

The latest thing from Europe isn’t nearly as exciting as haute couture or the French New Wave. The “carbon border tax” unveiled in July by the European Union has already found its way into Sen. Bernie Sanders’ (I-Vt.) budget plan. But unlike high fashion and Francois Truffaut, this new tax is a terrible idea.

The proposal would tax imports from countries that the United States determines are not doing enough about climate change. The tax would apply to products that have a specified carbon content, such as steel, iron, aluminum and cement, as well as raw materials like oil, natural gas and coal.

Because those products are used so widely in the economy, a carbon border tax would drive up the cost of almost everything Americans buy, from cars to appliances, from medical devices to groceries.

Why would we need a carbon border tax?

To pay for Sanders’ multitrillion-dollar spending spree that he hopes to pass on a party-line vote in the Senate using expedited procedures that get around a filibuster.

What would we get out of it? A lot of wasteful spending that would devastate the economy and make life harder for people, while doing little, if anything, to improve the environment.

That’s a bad deal in Europe, America or anywhere else.

Better stewardship of our planet and a growing, thriving economy aren’t mutually exclusive. On the contrary, they go hand in hand. The United States, without carbon protectionism or massive energy taxes, has far outpaced most of the rest of the world over the past two decades in reducing energy-related carbon emissions, and has among the lowest levels of air pollution on the planet.

In addition to abetting needless spending increases and driving up consumer prices, the tax would invite retaliatory tariffs from other countries. That would hurt U.S. exporters, such as farmers, along with manufacturers and thousands of small businesses that use imported raw materials.

The goal of U.S. policy should be to make American businesses more competitive in the global marketplace. A carbon border tax would do the opposite, making it more difficult and more expensive to create jobs for American workers.

And it would put the United States in the awkward position of potentially violating our own trade agreements.

To get an idea of how bad an idea this is, the E.U. announcement inspired China to defend the international trading system. That’s long been America’s role, but it won’t be if we join Europe in a carbon border tax.

The irony is that disrupting the global trading system and making virtually everything more expensive for American shoppers may not improve the environment, but it will make a lot of people worse off — particularly those least able to afford it.

Carbon protectionism would leave the American people and the world’s poor much worse off, exacerbating energy poverty, increasing the price of electricity and home heating and eliminating billions of dollars in consumer benefits from domestic energy production every year.

Combined with exorbitant taxes on natural gas, a cap-and-trade program to mandate certain types of energy and business tax hikes, the budget proposal would put the kind of innovation needed to achieve truly sustainable environmental improvements farther out of reach.

Washington needs to shake loose this flawed mindset that the only path to a flourishing, healthy environment is economic pain and higher taxes. Experience has shown that the exact opposite is the case: Unleashing the American people to prosper and innovate is the path to greater economic security and a cleaner environment.

The border carbon tax is a path to higher prices, restricted growth and an economy that can’t support the kind of innovation that will meet our environmental challenges. Both the tax and the budget resolution should be rejected.

 

Tim Phillips is president of Americans for Prosperity.

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