Is there a bipartisan China-carbon consensus?
Is there a bipartisan China-carbon consensus?
Some Republicans seem to back a Europe-inspired carbon tax and tariff regime
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Now for today’s discussion: Eyck Freymann has a provocative and highly-recommended article ($) this week in The Wire China, part of his important “Warming War” series:
Its thesis is that, after decades of “full-throated denialism,” US Republicans have come around to being interested in climate change or global warming (though they prefer to say “resilience” to avoid the terms they have long worked to make politically toxic)—and that they and Democrats “are converging on a consensus” that the way to confront the problem involves carbon tariffs targeting China.
A consensus on carbon tariffs?
The putative consensus revolves around two hubs. First is the notion, embraced by some prominent Republicans including Florida Governor Ron DeSantis, that whatever you call the problem, there are adaptations and resiliency measures that need to be taken. Second is a specific policy proposal that, given the assumption that China will remain a major emitter with its stubbornly coal-powered economy, the United States should use tariffs called a “carbon border adjustment mechanism” (CBAM) to make carbon-intensive Chinese imports more expensive, encourage China to decarbonize, and reward less carbon-intensive production in the United States and elsewhere.
CBAM is a policy idea that generally goes hand-in-hand with a domestic carbon price: If my country is going to incorporate the previously externalized costs of carbon emissions into the prices of domestically-produced goods, those goods would become less competitive compared to alternatives from countries where emissions are not priced in. Therefore, to prevent a carbon tax from penalizing my domestic industries, I should use CBAM to price in emissions for imports not already covered by a commensurate carbon tax.
Freymann writes that in Europe, where carbon pricing is already happening, a CBAM scheme for some key commodities is on its way. He cites a study by an expert at China’s State Council Development Research Center estimating, in Freymann’s words, “If Europe fully implements CBAM, it could reduce Chinese GDP by 0.64 percent and destroy 2.3 million jobs.” The author, He Jianwu 何建武, argues that this scenario calls for a continued emphasis internationally on “common but differentiated responsibilities” and historical emissions, as well as a domestic emphasis on reaching the “two carbons” goals, peak emissions and carbon neutrality. Freymann writes:
If the U.S. were to follow Europe and adopt its own domestic carbon price, the two mega-economies could join up and create a massive protected market that every country and firm in the world would need to access. It would create a de facto global carbon price. This would be one of the best possible force-multipliers for decarbonization… It would also be a disaster for coal-powered economies like China.
It is because of Beijing’s extreme vulnerability that CBAM found its way back onto the agenda at the very end of Trump’s term. Robert Lighthizer, the U.S. Trade Representative, hinted at the proposal in a memo to the World Trade Organization. Republican Senators Mitt Romney, Susan Collins, Lisa Murkowski and Mike Braun formed a group to explore the issue.
In essence, the narrative is that some Republicans got interested in CBAM because it’s another way to make life difficult for China’s government. Democrats and progressives who favor it seem to be into it for the more old fashioned reasons, to exert decarbonizing pressure while not disadvantaging US interests, but the drive to “compete” with China pervades.
Devils in the (Congressional) delegations
The article covers some potential downsides for decarbonization of the CBAM approach. US tariffs on Chinese solar components have done little to power up domestic production and make solar rollout more expensive in the United States, and since Chinese photovoltaics are carbon-intensive to produce, they’d get more expensive yet. Some argue that’s worth it to avoid US dependency on Chinese production, though UCSD Professor David G. Victor tells Freymann, “Most of the supply chain discussion today is bullshit,” arguing markets would adapt if there’s a disruption.
These questions will have to be for another day, but the article at hand raised several questions for me that, together make me pretty skeptical that there is a bipartisan consensus on China, climate, and CBAM. [NB: I don’t know the answers to these questions; shoot me a note if you know where to find them or think I’m off-base!]
Am I just blind to the consensus on a carbon price—which goes hand in hand with CBAM? Maybe I’m being old-fashioned, but notwithstanding DeSantis’s amenability to select resilience measures without which major parts of his state will be reclaimed by the sea, there are still a huge number of GOP electeds at the national and state levels who are keenly responsive to fossil fuel interests, not your biggest proponents of a price on carbon emissions. Even Democrats had to go 35 rounds to get the Inflation Reduction Act past Joe Manchin, and not without losing some important policy ambition. Of course, no Republican joined the Democrats to pass these huge investments that will benefit many of their constituents and help domestic industries compete with Chinese competitors. And as Freymann notes, Democrats themselves were divided last time cap-and-trade was a serious possibility. I would love to learn that I’m wrong here, but this seems pretty far out.
Is the idea that Europe will play hardball first with the world, and then the United States will align with it to screw China? It seems likely that if Europe goes forward with CBAM tariffs on the 2026 timeline discussed in the article, the United States will be hit with some tariffs as well, though presumably not as badly as China due to generally lower carbon intensity. I can imagine the US politics of being slapped with European carbon tariffs could go several ways. One extreme might be to rapidly implement further decarbonizing efforts, whether or not through cap-and-trade, and join in the tariff party to hurt China; another might be to escalate a trade war with Europe on a more mercantilist economic logic, which is more or less what happened last time the GOP was actually in charge. Europe could jostle the United States in the right direction, but my country can be pretty stubbornly wrong on carbon.
Consensus or not, is CBAM a good idea? It seems like it should be. If combined with the United States actually reducing carbon intensity and overall emissions, policies that reward that behavior and pressure other markets to follow suit seem basically rational. As said above, this is not a new idea; what’s new is that some Republicans are no longer denying climate change and there’s the possibility that screwing China could be a bipartisan rallying point for a policy that could mitigate warming. Even assuming that the right thing to do for global climate justice would be to take common but differentiated responsibilities seriously and to grapple with historical emissions, more downward pressure on emissions is generally good. However, this approach would probably come with a deepening of decoupling that portends highly uncertain outcomes for industrial and carbon efficiency, the exchange of ideas and knowhow on warming mitigation and adaptation, and the distribution of resources between priorities such as, say, energy transitions vs. military dominance. To say nothing of the fact that both China and the United States will be facing climate-driven disruptions already under way.
In all, I’m skeptical that there is an actionable consensus here, I’m unsure about the real prospects of the United States moving in the CBAM direction due to entrenched interests and unpredictable politics, and it’s not totally clear the consensus would be good if it exists.
But it’s a well-done and thought-provoking article, and I very much encourage you to read the article and share your thoughts. That’s all for now. I’ll leave you with a quote that I’ll keep thinking about.
“The vast majority of my friends in the administration right now know that China isn’t serious about mitigation in a way that’s consistent with two degrees [of warming],” one [implicitly Democratic -Ed.] former White House official told The Wire under condition of anonymity. “They can’t say that publicly, but they recognize that they have to change their strategy.”
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About Here It Comes
Here it Comes is written by me, Graham Webster, a research scholar and editor-in-chief of the DigiChina Project at the Stanford Cyber Policy Center. It is the successor to my earlier newsletter efforts U.S.–China Week and Transpacifica. Here It Comes is an exploration of the onslaught of interactions between US-China relations, technology in China, and climate change. The opinions expressed here are my own, and I reserve the right to change my mind.