Save the environment, save American democracy
The US withdrawal from Afghanistan has received all the attention, but it is not the only significant change in US foreign policy this year. The same month that President Joe Biden declared he would end America’s longest war, he also announced a goal of dramatically reducing greenhouse gas emissions in the United States by 2030. Keeping that promise will be difficult given partisan polarization and slim Democratic majorities. in Congress, but this is essential to maintain a liveable environment for the 21st century.
Biden’s Earth Day announcement could open a new chapter in America’s political economy. Its goal of cutting emissions by around 50 percent by 2030, on track to achieve net zero emissions by 2050, will result in a massive reorientation of the United States economy and foreign policy. But the payoffs would be just as huge: the Biden administration could save the global environment and renew the ragged US social contract by advancing a pro-climate vision that inspires a new generation of Americans.
Decarbonization requires creative destruction. The United States must take action that will end the fossil fuel economy and replace it with clean energy savings that are both more efficient and better for the health and well-being of people. Numerous reports show how advancements in technology have made this possible: the clean mass electrification that powers an electric vehicle revolution is now possible, and other building blocks of a green economy, from hydrogen-powered vehicles to industrial processes to very low emissions, are about to become a reality.
This effort would require substantial public investment in clean infrastructure and major changes in industrial policy. However, it would also create millions of jobs in the assembly of wind turbines, modernization of buildings and the construction of new manufacturing facilities. The benefits of such green reindustrialisation are enormous and the long-term economic costs modest, especially compared to the costs of inaction. For reasons of equity and political viability, the federal government must also use its fiscal resources and regulatory powers to ensure that new jobs in renewable energy are as well paid and unionized as jobs in the fuel industries. fossils they replace.
Climate policy is not just domestic policy: it is foreign policy. For US environmental efforts to be successful, they must not undermine the global competitiveness of US industry or encourage greater emissions from its trading partners. Climate policy must therefore be multilateral, allowing the United States and countries around the world to take bold steps towards decarbonization without seriously harming domestic industries and without generating enormous political resistance.
TOOLS OF TRADE
While domestic policy goals often conflict with foreign policy goals, climate policy does not today. The United States faces a historic opportunity to both help save the planet, strengthen social solidarity at home, and strengthen ties with its allies in Europe and Asia.
Between 1947 and 2017, US trade policy aimed to reduce protectionist barriers both domestically and globally. This objective was first achieved through reciprocal trade agreements, then through international institutions such as the General Agreement on Tariffs and Trade and the World Trade Organization. A fundamental rule of the GATT and the WTO is non-discrimination: foreign supplies cannot be treated in a substantially different manner from that of domestic suppliers, except in strictly defined circumstances.
The European Union has always been a strong supporter of free trade, but its approach to the climate challenge is forcing it to change course today. In July 2021, the European Commission proposed a path that would make it the first economic bloc in the world to achieve zero net greenhouse gas emissions by 2050. The plan, dubbed the European Green Deal, would fundamentally revise laws and EU regulations in eight major policies. and devote one trillion euros to climate-related investments. It would also expand the EU’s carbon market, known as the European Union Emissions Trading Scheme. The EU ETS obliges industries in the European Union to buy carbon credits to offset their emissions. The committee may take some of these measures on its own initiative, but will need the approval of the European Council and member governments for the most important measures.
Climate policy is not just domestic policy: it is foreign policy.
If the EU adopted this policy without imposing tariffs on foreigners, it would seriously disadvantage local industries and economic sectors. It wouldn’t help the environment either: manufacturing would move to countries with weaker rules, increasing those countries’ emissions. The European Green Deal therefore includes a “carbon border adjustment mechanism” – essentially a customs duty imposed on imports of industrial goods covered by the emissions trading regime.
CBAM would focus on industrial sectors that are high carbon emitters, and its sanctions would only apply to countries that do not have comparable national carbon charges in order to equalize costs on domestic and foreign producers. If adopted unilaterally, it would certainly face objections under WTO rules. Unsurprisingly, the Organization for Economic Co-operation and Development (OECD) has organized high-level meetings on this issue to reconcile a CBAM with WTO rules. These meetings revealed broad disagreements on several fronts, including objections raised by the Biden administration.
A CBAM instituted unilaterally by the United States would encounter the same problems as a measure enacted by the EU. Both policies are guaranteed to generate enormous political resistance from trading partners and suffer from the economic inefficiency of tariffs. However, a multilateral CBAM is a whole different story, which is why the EU and OECD initiatives offer the United States a historic opportunity, as well as a difficult negotiating challenge.
If the United States enacted a CBAM in agreement with the European Union, it would exempt the EU from any sanctions and would strongly encourage other countries to follow suit. The combination of a US and EU CBAM, introduced in coordination, would also encourage China and other countries to adopt their own carbon pricing measures to avoid being subject to US and EU tariffs.
The beauty of this arrangement is that no tariff would ever need to be collected. Politicians who are serious about reducing climate change should seize the opportunity to raise their own domestic carbon prices while blaming foreign governments. A multilateral CBAM with near universal membership could avoid having negative effects on trade and could generate a win-win situation – economically, politically and environmentally.
The Biden administration could renew the tattered US social contract by advancing a pro-climate vision.
This policy would have the double advantage of avoiding a trade war and fighting climate change. Senate Democrats are already making plans for a border carbon tax. The Biden administration should embrace these proposals and shape them in a coherent multilateral fashion, rather than resist them.
The challenge is that a border carbon tax will be technically difficult to implement unless the United States sets a price on carbon emissions, which is politically unlikely, at least in the short term. In the absence of a carbon price, the calculations necessary to ensure comparable levels of climate regulation will be difficult. Yet economists consider it feasible.
Two other major developments over the past summer add promise and urgency to the issue of CBAM. Under the leadership of Prime Minister Yoshihide Suga, Japan renewed its climate commitment by pledging to reduce its emissions by 46% by 2030 and achieve net zero emissions by 2050. And on July 16, China has opened its carbon trading market as part of its new national emissions trading system. Prices in China are still low, but the EU ETS also started with low prices, and carbon credits have become more expensive over time. The more determined Japan and China are to reduce emissions, the more attractive an initiative to implement CBAMs globally should be.
SEIZE THE MOMENT
The Biden administration should view effective climate policy not only as essential to the health of the planet, but also as a way to unite Americans around a common sense of the national goal. When it comes to the environment, fully relying on efficient markets is unrealistic because of market failures, which arise when the costs of pollution are not paid by the polluter. Vigorous government responses are needed to correct the market failures that pose existential threats to human life on this planet.
In the last two decades of the “war on terror,” the United States has witnessed a breakdown in social cohesion that has both threatened its democracy and made vigorous climate action more difficult. The withdrawal of the Biden administration from Afghanistan gives it the opportunity to reverse these trends.
The extreme polarization of the United States has weakened its foreign policy. A national climate-friendly policy, coupled with measures to encourage other countries to adopt similar policies, could help restore Washington’s global leadership. Organized with sensitivity to issues of social equality in the United States, the push for decarbonization could help give meaning to the goal of forging a broad political coalition that survives from election to election. This in turn would help rebuild a sense of national solidarity: by generating well-paying green jobs and rebalancing the social contract between the rich and the working class, policies designed to both save the climate and reduce inequality could regenerate social cohesion and anchor a more coherent American foreign policy.
The Biden administration faces serious obstacles in Congress to put the United States on a decarbonization path, and the multilateral carbon border adjustment mechanism necessary for decarbonization will be difficult to negotiate. But the White House should not be deterred. Already, the wildfires and floods in the United States, as well as similar emergencies in China and Germany, provide vivid illustrations of the destruction that will be brought about by a climate catastrophe. If Biden succeeds in implementing a multilateral climate policy, he will achieve three essential goals: preserving the global environment, strengthening US global leadership, and strengthening US democracy.