Guest Contribution: “Let the WTO Referee Carbon Border Tariffs”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared at Project Syndicate.

The most important task in confronting global climate change is the need to enforce serious quantitative limits on Greenhouse Gas emissions, such as the Nationally Defined Contributions which were originally negotiated in the 2015 Paris Agreement.  The 27th Conference of Parties to the UNFCCC  which concluded in Sharm-el-Sheikh November 20, did not tackle this task.  Carbon border equalization measures, including tariffs against carbon-intensive imports from lax countries, might supply the teeth that have been missing from such agreements.  But they also risk advancing protectionism, which would ultimately slow the needed global energy transition.  Adjudicating the fairness of carbon tariffs would be a good job for a reinvigorated WTO.

  1. The lack of progress on national policies to achieve desired targets

It is a waste of time for negotiators to argue over whether the global aspiration should be to limit warming to 1.5 degrees Celsius versus 2.0 degrees, when individual countries are pursuing emission policies that are too lax to achieve collectively either of those numerical climate goals.  Most countries have failed so far to achieve emission targets that they themselves had set previously.  The fact that countries missing their targets have not even been individually called out, let alone subjected to any sort of international penalty, shows that enforcement of the agreements as they stand is utterly toothless.

The biggest increases in carbon emissions are coming from China and other developing countries.  But they, understandably, ask why they should cut emissions before the rich countries, who already achieved industrialization while emitting freely. To be sure, the European Union has its Emissions Trading System, which has successfully raised the price of carbon to around € 75 per tonne on that continent.  And, at long last, the US this year legislated important steps to fight climate change in its Inflation Reduction Act, which will heavily subsidize electric vehicles and other green technologies.  But these do not go far enough to accomplish the environmental goals.

The free-rider problem is exacerbated by the problems of carbon leakage and competitiveness: each country asks why it should impose regulatory costs on its own firms, if production in their respective industries will respond by relocating to countries where such costs have not been imposed, vitiating the global reduction in emissions.

  1. Carbon Border Adjustment Mechanism

Realistically, there is one way to protect firms in carbon-intensive industries that are regulated by their governments, against imports coming from foreign competitors that are less regulated.  There is also, realistically, one way to give free-riding countries a strong incentive to join the set of countries that are making serious commitments and then keeping them. Fortunately, the way to encourage countries to become commitment-abiding members of the club is the same sort of instrument that insulates competitively-disadvantaged firms in member countries against non-member exports: carbon border equalization measures.[i]

The EU is expected to finalize in December plans for its Carbon Border Adjustment Mechanism (CBAM), which will protect certain of its carbon-intensive industries. The proposed list of industries, originally from the EU Commission, started with aluminum, iron and steel, cement, fertilizer, and electric power generation.  But the European Parliament wants to expand the list to include various other industries, along with indirect emissions.  Tariffs will be imposed on imports to equalize the weekly price of carbon between domestic producers and their foreign competitors.  Currently, among major trading partners, only the United Kingdom has a carbon price close to the EU’s € 75 per tonne.

When the EU’s CBAM arrives, US firms will see it as a threat, perhaps even as a violation of WTO rules, especially if the list of protected industries is expanded to include many where carbon usage is indirect and difficult to quantify or if the EU over-estimates the gap in the effective prices of carbon.  The quantification problem is not just a matter of data, but arises even conceptually.  Should imports of electric cars be penalized because steel and aluminum are inputs to their production?

  1. A new role for the WTO?

The EU says that its mechanism will comply with WTO rules for international trade.  It may indeed turn out to do so.

There are precedents for the WTO’s environmental exceptions, which one need not be a lawyer to perceive. Articles XX(b) and XX(g), which date back to the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), allow exceptions to protect health and natural resources.  That they include environmental objectives was made clear in the preamble to the 1995 Marrakesh Agreement that established the WTO and in subsequent rulings, beginning with a 1996 decision on US gasoline imports.

Most notably, the WTO dispute settlement mechanism ultimately upheld environmental exceptions in the famous 1998 shrimp-turtle case, so long as the US did not discriminate unnecessarily against foreign fishermen.  By contrast, under the pre-WTO GATT, the US could not apply tariffs against imports of Mexican tuna to stop fishermen from using production methods that ensnared dolphins in the nets.

In 2007, a WTO Appellate Body decision on  Brazilian restrictions against imports of retreaded tires also confirmed the applicability of Article XX, finding that the rules accord considerable flexibility to WTO Member governments when they take trade-restrictive measures to protect life or health, and that problems like global warming are included.  One aspect that strengthens the applicability of these precedents is that we are not talking about targeting practices in other countries that harm solely their local environment, where the country could make the case that this is nobody else’s business.  Further, it probably helps legally that CBAMs are enacted in pursuit of the goal of multilateral agreements, that is, the goal of climate change mitigation.


Who is to be the judge in the CBAM case of what is the effective price of carbon in countries like the United States, where climate policies are now largely pursued without the price mechanism?  Can the EU be trusted to make such judgments, unbiased by the economic interests of the protected industries? Rather, it seems like a natural job for a revived WTO, if its members were to give the organization such a mandate.  Even the US might rediscover the usefulness of the WTO.

An environmentally-driven reinvigoration of the WTO would benefit developing countries too. US and EU trade barriers against imports of solar panels and other renewable energy equipment, from Cambodia, China, Malaysia, Thailand, and Vietnam might give these exporting countries cause to bring cases before a resuscitated WTO.  And the “buy American” aspect of subsidies in the US Inflation Reduction Act might give its trading partners a case to take to the WTO.  The winners would include not just producers in the plaintiff countries, but also those buyers in the US who want to continue lowering the costs of wind turbines, solar panels, batteries, and electric cars.

In place of an environmental trade war, a revived WTO could foster new norms for beneficial CO2 border measures and generate a wave of trade in green goods and services.   WTO Director-General Ngozi Okonjo-Iweala would like to revive lapsed negotiations among a willing subset of members to facilitate free trade in environmental products. This would cut through the web of measures and counter-measures, and benefit all countries. The big winner in all these examples would be planet Earth.

[i] Climate clubs were proposed by Nobel Prize winner Bill Nordhaus.


This post written by Jeffrey Frankel.

52 thoughts on “Guest Contribution: “Let the WTO Referee Carbon Border Tariffs”

  1. pgl

    Climate Clubs: Overcoming Free-Riding in International Climate Policy
    William Nordhaus
    VOL. 105, NO. 4, APRIL 2015
    (pp. 1339-70)

    Dr. Frankel provided a link to this very important paper.

  2. pgl

    “In place of an environmental trade war, a revived WTO could foster new norms for beneficial CO2 border measures and generate a wave of trade in green goods and services. WTO Director-General Ngozi Okonjo-Iweala would like to revive lapsed negotiations among a willing subset of members to facilitate free trade in environmental products. This would cut through the web of measures and counter-measures, and benefit all countries. The big winner in all these examples would be planet Earth.”

    The big loser would be Putin’s disinformation campaign as this trade war would no longer be their feeble excuse for Russia’s genocide of the Ukrainian people.

  3. pgl

    A little news from the Russian war efforts:

    Russians are accusing Putin of ignoring domestic problems while focusing on the war in Ukraine.
    Some Russians are complaining about a lack of heating in their homes, The Daily Beast reported.
    Forbes Ukraine estimated last week that Russia has spent around $82 billion in the war so far.

    Russians are angry President Vladimir Putin is spending billions on an increasingly unpopular war in Ukraine as they freeze back home, The Daily Beast reported on Thursday. As Russian troops continue to strike Ukraine’s vital power in fractures — plunging millions into darkness — Russians at home are also struggling to keep afloat amid crippling Western sanctions. People living in many of the remote regions of the country, where conditions are at their worst, have been complaining about a lack of heating in their homes and burst water pipes, The Beast reported, citing social media posts. Remote regions including Tyumen and Yakutia are among the worst affected, reporting many victims of frost in the past week, the outlet reported. “They take young men—the only breadwinners—away and send them back in coffins. The guys freeze on the front, get sick, die while their families live in poverty,” Valentina Melnikova, an activist with the Soldiers’ Mothers Committee, told The Beast. “It seems authorities have no interest left in human lives at this point,” she added.

    But Putin has his pet poodle JohnH to inform us that none of this matters as Macron is mad at Biden for serving California and not French wine last night.

    1. JohnH

      Yet more BS from pgl. Do I care about wine served at a WH dinner?

      But substantive issues do exist. “European Union governments are crying foul, threatening to launch a trade war by subsidizing their own green economy sector.

      (Macron said:) “The consequence of the IRA is that you will perhaps fix your issue but you will increase my problem. I’m sorry to be so straightforward,” Macron said on Wednesday, warning Biden could “split the West.”

      What is particularly interesting is that Macron left Biden to meet with Elon Musk, who is about to become the bane of Biden’s existence. In case you hadn’t heard (and you might not have, given the highly politicized state of the news media), Musk released a lot of Twitter internal information to Matt Taibbi. The information included discussion suppression of news stories, particularly relating to Hunter Biden, in the days before the 2020 election.

      These should be particularly interesting to a partisan hack like pgl, who most always puts political loyalty before principle.

      1. Barkley Rosser


        Gosh. If both the US and the EU subsidize green economy, we might actually get some green economy. This is something we should be super worried about?

      2. pgl

        I think JohnH is trying to write as many worthless words without a single honest point in the history time. Or maybe he has decided to become Elon Musk’s campaign manager. This should be a laugh riot.

      3. pgl

        “Musk released a lot of Twitter internal information to Matt Taibbi”. Since Jonny boy has decided to cuddle up with Musk and the MAGA crowd, let’s note the latest from his new crew:

        Former President Donald Trump drew criticism for suggesting the US get rid of the Constitution.
        Trump’s calls came after Elon Musk released information claiming Twitter violated the First Amendment.
        A White House spokesperson said Trump’s words should be “condemned.”
        Former President Donald Trump took to Truth Social to demand the constitution be “terminated” following what he called “widespread fraud” from tech companies and Democrats. “Do you throw the Presidential Election Results of 2020 OUT and declare the RIGHTFUL WINNER, or do you have a NEW ELECTION? A Massive Fraud of this type and magnitude allows for the termination of all rules, regulations, and articles, even those found in the Constitution,” Trump wrote in a Saturday post. Trump’s new accusations of election fraud came after Matt Taibbi, a Substack newsletter publisher, released a series of tweets called “The Twitter Files.” The tweets, which Taibbi said he published after agreeing to “certain conditions,” revealed internal communications between Twitter employees who made the decision to suppress a New York Post story on Hunter Biden in 2020. Elon Musk, CEO of Twitter, claimed that the files were evidence Twitter meddled in the 2020 elections by suppressing free speech, which scholars have refuted. Trump has also been falsely claiming he was the rightful winner of the 2020 election for two years now. In a statement to CNN, White House Spokesperson Andrew Bates called for Trump’s words to be “universally condemned.” “You cannot only love America when you win,” Bates said in the statement to CNN.

        Jonny boy does not have to love America since his home is now the Kremlin so he can serve at the pleasure of Putin the war criminal.

        1. JohnH

          The Big Takeaway here is the smoking gun that BigTech censors legitimate news stories. But partisan hacks like pgl support that, because Twitter checked with Democrats first.

          This reminds me of Democrats’ shock and outrage at theNSA’s warrantless wiretapping under Bush. Under Obama, their criticism went silent! And with the bipartisan consensus that government snooping was OK, they didn’t even raise it when Trump took over! Instead, they complained about China’s surveillance state, not noticing that all the infrastructure and tools are in place for an equally draconian surveillance state in the US. All that’s missing is a competent Trump 2.0 or his Democratic equivalent.

          1. pgl

            “The Big Takeaway here is the smoking gun that BigTech censors legitimate news stories.”

            I have to wonder if you even know how to READ. The Big Takeaway is that they did not publish nude pictures. Oh wait – you want to look at Hunter Biden in the nude – don’t you?

          2. baffling

            “The Big Takeaway here is the smoking gun that BigTech censors legitimate news stories. ”
            actually the bigger story is the way faux news censors stories. that should concern you more.

      4. pgl

        This Twitter file controversy is such a fraud. Yes Twitter decided not to let nude pictures of Hunter Biden stay up but come on – does Jonny boy get all excited over nude pictures of guys? I certainly do not.

        I guess Jonny boy’s devotion to Putin has extended to demanding nude pictures of the President’s son. Other than that – Jonny boy has gone full MAGA in his dishonesty.

      5. pgl

        More on this nonsense about the Twitter files straight from the Rolling Stone:

        In examples of what Taibbi characterized as wrongly removed content, the Substack blogger cited a number of tweets containing non-consensually posted intimate imagery of the former Vice President’s son, commonly referred to as “revenge porn.” Responses online amounted to a collective yawn. “Nice to land and read Twitter files only to find out there aren’t any(?),” one former Twitter employee quipped to Rolling Stone. “Dick pics are not a smoking gun, no matter how many times you say First Amendment,” posted Swisher. While the first part of the series turned out to be a flop, Musk continued to tweet: “Tune in for Episode 2 of The Twitter Files tomorrow!”

        Maybe Jonny boy should be subscribing to OnlyFans instead of Twitter.

    2. JohnH

      “Russians are angry President Vladimir Putin is spending billions on an increasingly unpopular war in Ukraine as they freeze back home.” Highly unlikely. Russia has plenty of energy. and I seriously doubt that Russians are having trouble heating their homes. Most likely this is just more US propaganda.

      What’s hilarious is that underlying this story is most likely a classic case of projection. To deflect from the obvious fact that many Europeans and Brits are having trouble paying their heating bills this winter and are rethinking their governments’ wasteful largesse in Ukraine, Daily Beast claims that it’s Russians who are suffering! Highly implausible.

      pgl can’t even distinguish propaganda that’s the most implausible BS these days…but I guess that’s what it takes to be a “patriotic” American–uncritical thinking.

      1. pgl

        Awww Vlad made you write this disgusting nonsense before he fed you. I guess going without dog food for a week can be really tough.

      2. Barkley Rosser


        I have seen these stories as well. They may be overstating the problem, but it is not a problem of supplies reportedly. It seems to have shown up in at least some remote locations, especially in Siberia, with the problem being non-functioning supply lines. Why are they reportedly not functioning? Repair people have reportedly been drafted in the mobilization. The upshot is that the locations that are affected by this are completely out of gas or whatever and just completely freezing, with this also being in super cold areas, e.g. Yakurtia in Siberia being one.

        So, the numbers may not be all that large, but the people affected by this are suffering much worse cold than even people in areas of Ukraine that have lost their power, much less than people in Europe paying higher heating bills or even in the US paying more for gasoline, although gasoline prices have definitely come down somewhat more recently, and the recent election did not see geeat victories by those pushing pro-Putin lines while whining about inflation.

        1. baffling

          a big problem will be that repairs require replacement parts. something that Russia is unable to acquire with sanctions. same thing applies to high tech equipment. it will take time. but eventually Russia will be stuck in a sort of time warp, like Cuba and its old cars. can’t buy new ones, and can only repair so much of the existing ones.

          we are not in this for the battle of winter 2023. we are in this for the war. long term, Russian prospects are bleak.

  4. pgl

    Putin’s apologists are now accusing the Pope for being allegedly racist?

    Vladimir Solovyov described as “unacceptable and fundamentally racist” the pontiff’s comments that some minority groups of soldiers fighting for Russia had behaved worse than others. After being asked by the Jesuit magazine America about the perception that he had been reluctant to directly condemn Russia for the war, the Pope said he had received “much information about the cruelty of the troops.” He told the publication that “the cruelest are perhaps those who are of Russia but are not of the Russian tradition, such as the Chechens, the Buryats and so on.” Chechens are an ethnic group from the predominantly Muslim republic of Chechnya, in the southwest of Russia. Buryats, a Mongol ethnic group indigenous to Buryatia, in eastern Siberia, traditionally follow Buddhist and shamanic belief systems. The response from Moscow has been to interpret the pope’s comments as a slight against the multi-ethnic and multi-confessional aspects of Russia, where the predominant religion is Orthodox Christianity. Chechen leader Ramzan Kadyrov said the pope had fallen victim to the “perseverance of the foreign media.” Russian foreign ministry spokeswoman Maria Zakharova responded in a Telegram post that the comments signified “no longer Russophobia,” but “a perversion on a level I can’t even name.” Solovyov also leapt on the comments in his radio show as a chance to make some sectarian comments about the Catholic Church, which separated from the eastern Orthodox churches during Christendom’s schism of 1054. “Orthodoxy differs from Catholicism like life differs from death,” Solvyov said, quoting the Russian philosopher and theologian Nikolai Berdyaev, who died in 1948.

    Pretty pathetic consider it is their boss that is committing genocide.

    1. Anonymous

      vatican should come out and state which of st Augustine tenets of just war support nato giving to a non member country to fight a nuclear power.

      maybe the pope saw the reading from Isaiah in the Mass the other day?

      1. pgl

        You think you have the right to lecture the Pope? The case against Putin’s war crimes is very well established no matter how many times Putin’s poodles (you and JohnH) try to deflect.

        1. Anonymous

          yes, moral war is oxymoron.

          the us military is not the world’s police to right things you want fixed.

          use the un or the haag!

          war is state sponsored murder

          1. Barkley Rosser


            You declare that “the us military is not the world’s police to right things you want fixed.” Maybe not, and indeed they are not fighting at all to fix things in Ukraine. You did not notice that? If you did notice that, then why did you make this completely irrelevant remark?

            Your marbles are rolling around the floor in plain view of everybody.

      2. Barkley Rosser


        The number one reason for a just war is self defense. Helping a nation defend itself thus certainly fits. You do not know that? Gag, you really have lost the marbles you sort of appeared to once have here a decade and a half ago.

          1. Barkley Rosser


            Wjat “logic fallacy”? Ukraine is pretty clearly fighting a just war according to Catholic doctrine while Russia is not.

            Of course, you are the one who somehow seems to think that the pope needs to reread St. Augustine because somehow he should hot be criticizing Russia’s invasion, although given how garbled and complete messed up so much of what you have been writing here lately is, who knows?

          2. baffling

            russia is the one attacking civilians during the war. Russia is the one invading another nations sovereign lands.

  5. pgl

    The Hershel Walker campaign just got a $1.5 million donation. Guess who provided this:

    IN A LAST-MINUTE bid to shape the composition of the U.S. Senate, fossil fuel energy industry interests are planning to infuse $1.5 million into Georgia in support of Herschel Walker, the Republican facing off with Sen. Raphael Warnock, D-Ga., in the runoff on December 6. The infusions of cash, designed largely for get-out-the-vote efforts, are detailed in documents tied to Run Herschel Run, a super PAC, and the Empowerment Alliance, a nonprofit that says it is devoted to policies to “secure America’s energy independence and, with it, Americans’ prosperity, freedom, and security.”

    Does Hershel even know what “drill baby drill” means?

  6. Gregory Allen Bott

    PGL, let’s remember that Putin is part Uralic, he is not all “white”. So is Dugin with that Uralic ancestry. It’s what the liberal press misses. Putin does not like the R1a/l1 Baltic peoples. It’s why western/northwestern Russia is under martial law. Orban, Trump, Fuentes…..I could go on and on about the scam. There is white nationalism. There is kosher nationalism. I made a report on Fuentes, daily stormer 6 years ago. Yet, people.still believe the lie. Trumpism is neoconservative. Unlike the 2000’s, they don’t play a straight game. The Saudi’s and Russian elites own it all. Much like 911 and Dick Cheney.

    1. Anonymous

      the slavo-rus and the balts have been going at it since prince nevsky annihilated the teutonic order in 1242…..

      btw putin is an orthodox christian in much better stead with the metropol of moscow than biden with the us bishops….

      some observe the catholic influence in west ukraine from the rumanian and polish attachments as a friction with the orthodox.

      i wonder if putin is having theaters run the eisenstein’s 1938 movie ….. the sound track is awesome!

      1. Menzie Chinn Post author

        Anonymous: Agree, Prokofiev’s score for Alexander Nevsky (Op. 38) is great. But everything else you write doesn’t seem particularly relevant.

        1. Macroduck

          Now, Professor, you know better than to have views on the arts. Wasn’t it CoRev who instructed us on the narrow intellectual lives of economics professors? You simply are not allowed to appreciate music.

          By the way, how’s your wonderful wife?

          1. Moses Herzog

            Although I wasn’t particularly taken by her latest (probably speaks more to my simpleton tastes than the work) I thought she might offer to put the entire piece up on Vimeo. I don’t doubt at all the aesthetics or artistic value of her latest work to minds greater than mine. I wager a lot of people would be grateful to listen. Art provides us with escape during crazy times, or more than just escape, a better path or more enlightened view. Ukraine etc, this qualifies as a time when art, referenced to time frames, has more value than usual.

        2. Anonymous

          the west of ‘post 1945’ ukraine is ;argely ‘byzantine catholic’, different than the rest which is schismed orthodox, a view from a catholic.

          in the 1200’s the baltic crusades went against the pagan prussians through the to pagan baltics and ran up against the orthodox in the battle on the ice which is the subtitle of eisenstein flick.

          my view is christian jihad is most harmful among christians, it is there today.

          1. Barkley Rosser


            You are down on the “Byzantine” (or “Greek”) Catholics of western Ukraine? They have no legitimacy because in your view they are “schismatic orthodox”? Heck, Kirill’s support for Putin’s unjust war invasion of Ukraine has created a schism within his own church.

          2. Barkley Rosser


            US Catholic bishops are unhappy with Biden over abortion, not over his support for Ukraine against the Russian invasion.

            I agree that intra-Christian jihads are evil. But if Orthodox Nevsky was justified in war against the invading Catholic Teutonic knights, then the Orthodox and Greek Catholic Ukrainians are justified in defending themselves against the jihadic invasion by the Russians, and the US and rest of Europe are certainly justified in supporting the Ukrainians by providing them with arms.

            In this case, it is Putin’s troops that are on the wrong side of the Battle on the Ice (cut Prokofiev’s music).

      2. Barkley Rosser


        Holy cow, you are really seriously losing it.

        The Russian Orthodox leader giving his approval to Putin’s unjust war is Patriarch Kirill, not a “metropol.” His approval of Putin’s “special opertion” led to a letter signed by 275 Russian Orthodox priests in early March criticizing him, as well as a schism in the church, with the branch of the church in Ukraine leaving it. Kirill is being blatantly nationalist over Christian in this, lacking major support within his own church for his actions supporting outright war crimes.

        As for your weird representation of the Nevsky war, the Teutonic knights were German Catholics who happened to have conquered the Baltic nations.

          1. Barkley Rosser


            Again, what illogic are you talking about? The “illogic” is entirely about the actions of Patriarch Kirill, who is trying to justify this unjust Russian invasion and has created a schism in his church by doing so. But you seem to be down on the Ukrainians, especially the Greek Catholics in western Ukraine. Are you unaware of how completely confused what you are writing here is?

          2. Barkley Rosser


            To the extent there is “illogic” going on here, it is ENTiRELY ON YOUR PART. Do you read, much less actually understand, what you are writing here? Actually, I fully understand if you do not understand what you are writing here, because, frankly, it makes no sense at all. Patriarch Kilrill is somehow supporting a “just war” in his support of slaughtering tens of thousands of innocent Ukrainian civilians while somehow “schismatic” western Ukrainanian “schismatics” are engaging in immoral “Christian jihad” while trying to defend themselves against the invastion that Kirill is supporting? That is what is looks like you are saying, in case you do not know that.

      3. baffling

        the Metropol of Moscow is losing influence daily. much of the orthodox world is turning its back on what used to be considered orthodox leadership. the Russian patriarch has lost more than he gained in this war. the Russian patriarch will never again achieve relevance as the leader of the eastern church.

    2. Barkley Rosser


      Good lord, what horse manure are you spreading? Purin’s “Uralic” ancestry is probably “Baltic Finnish,” which is most certainly about as “white” as you can get. Gag.

  7. Macroduck

    The Frankel and Nordhaus notions are complimentary and provide more than a sketch for international rules. No need to reinvent the wheel, and heaven knows the world is not up to such reinvention these days. A necessary mechanism already exists. Time to use it.

    There is another reason to hand new authority to an existing international institution, the WTO. China is working to substitute is own rules for existing ones, intent on repudiating what exists in favor of institutions stamped “made in China”. Acknowledging the athority of existing institutions is necessary if those institutions are to withstand China’s assault.

    Nobody likes being told they can’t do whatthey want, so rules-based institutions are always at risk from populst backlash. Well, there are worse things than a bit of frustration at having to play by the rules.

      1. Macroduck

        The REIT in question had a built-in provision to block redemption – illiquidity is a feature. Blackstone has the legal right to do what it did, which simplifies matters, but still leaves investors holding the bag.

  8. Michael Laird

    It seems Jeffrey Frankel’s heart is in the right place – as in the climate crisis is real, economic thoughts and actions should be applied as solutions, CBAMs are potentially useful economic tools, global organizations are useful actors to fight GHG emissions. But the article is vague, to the point of being unproductive.
    The EU and Canada are leaders in implementing CBAMs. Articles about their actions say their CBAMs are carefully crafted to be consistent with WTO rulings, e.g., these are non-discriminating environmental and health actions, they are not tariffs. Does Frankel see issues that these countries and the WTO are not taking environmentally-driven invigorating actions? He says WTO should “foster new norms for beneficial CO2 border measures” He does not describe the current problem or sketch out a better suite of policies. He says a revived, environmentally-driven invigorating WTO would benefit many countries. What would ‘environmentally-driven invigoration’ look like. How would we know it when we see WTO taking new actions? Again, no comments.
    He talks about the “buy American” aspect of the Inflation Reduction Act. This is a glass half empty/glass half full statement. We all know the IRA financially supports “build in America” not “buy American”. “Build in America” expands job creation and local production of strategic goods for local consumption/buying. Does he think the cost of future trade disruptions from uncertain authoritarian trading partners is so low that the USA should forego investments in local production assets for future strategic products, e.g., batteries, solar panels? If so, he should lay out the discounted cash flows.
    Articles like this one give the impression that senior economists are working on the challenges of the climate crisis. However, the large gaps and vague statements in the article provide few clues about specific action for WTO, legislative action, or economic research. The crisis is real. A recent New York Times article about research of climate 1200 different action scenarios says we have virtually no chance of limiting climate warming to 1.5 degrees. Stronger, faster action is needed. Mr. Frankel, stronger, faster analysis is needed to make an impact.

    1. Barkley Rosser


      My one regret about this piece by Frankel is that he did not address how Biden’s IRA fits in with this. Is it in violation of the WTO and not in synch with his proposed CBAMs that would be consistent with it? I have sneered at JohnH making a big fuss about European unhappiness with the protectionist elements of the US IrA, but indeed reportedly a lot of the time Biden and Macron spent talking together was about this issue, which Macron made quite a big deal of, even if it most certainly did not tilt Macron to being less supportive of Ukraine, with indeed him and France more recently tilting more strongly pro-Ukraine out of unhappiness with Putin’s attacks on energy infrastructure in Urkaine.

      Anyway, I am sorry Jeffrey did not more clearly address how the IRA fits in with his proposals.

      1. Anonymous

        Michael & Barkley,
        Responding to your desire that I make my positions clearer.
        (1) The decarbonization policies in the US IRA, while a good thing on net, discriminate against foreign producers. This raises the costs of electric vehicles, etc., which is bad for inflation and bad for the environment. Further, it does seem to be that the “buy America” restrictions potentially violate the WTO.
        (2) I know that the EU says its CBAM will satisfy the WTO. But the EU tariffs in carbon-intensive industries, meant to equalize the international differential prices of carbon, may treat the US price of carbon as zero, because the US (unfortunately) is not using the market mechanism in its decarbonization policy.
        (3) Problem 1 gives the EU a possible reason to want to use the WTO. Problem 2 gives the US a possible reason to want to use the WTO. Hence my hope that a resuscitation of the WTO, focused on the environment, might be possible.

        1. Barkley Rosser

          Thank you “JF,” who is presumably Jeffrey Frankel. That makes sense.

          BTW, I note that there is another person posting here a lot on this thread calling themself “Anonymous,” who has been bizarrely appearing to claim that the Ukrainians are not engaging in a “just war” when they attempt to defend themselves against invasion by Russia. I am pretty certain you are not that peculiarly illogical “Anonymous.”

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