Carbon Tariff Might Be Legal as a VAT

(National Post – Krista Lucenti)

Lawyers and consultants can expect a growth industry in carbon taxes

Notwithstanding a barrage of gloomy economic news, pressure is mounting on the U.S. and Canadian governments to take firm action to limit carbon dioxide emissions through regulation, caps and taxes. Some states and provinces have acted already, and even President George W. Bush has started talking about hard limits on emissions.

Meanwhile, a strong Canadian dollar and a looming U.S. recession depress our exports, while high energy prices squeeze Canadian manufacturers. Businesses worry that imposing a carbon tax or limits on emissions would further contribute to rising prices of exports and cause Canadian industries to lose their competitiveness vis-à-vis their foreign, non-taxed, competitors such as China, India and Brazil. The pressure would be particularly acute in energy intensive industries such as chemicals and steel.

To deal with the competitiveness problem, one proposal is to levy a carbon tariff on imports, set at the equivalent domestic rate. Such a tariff would “level the playing field” by eliminating foreign producers’ tax advantage.

But the idea raises a thorny question: Is it legal, under the rules and regulations of the World Trade Organization (WTO), to impose tariffs selectively on imports, on the basis of their believed upstream CO2 emissions? Click here for the complete article.