Bradford Plumer at TNR notes a significant complication with cap-and-trade systems for reducing carbot output- the ability of companies to simply outsource their carbon-intensive processes to countries without such systems:
Take Britain, which, under existing Kyoto Protocol rules, appears to have reduced its emissions 18 percent since 1990. That looks laudable, until one includes imported goods and services, in which case Britain's total carbon footprint has actually grown by nearly 20 percent, according to a study by the Stockholm Environment Institute. While there are no doubt real reductions being made at home, a good chunk of the country's emissions are being outsourced abroad.
Absent an all-encompassing global treaty on emissions, it will be difficult to prevent a similar situation in the US if some kind of can-and-trade or carbon tax is passed. Outsourcing carbon could actually make global warming worse, because US factories are typically cleaner than those overseas, and the imported items would then have the carbon emissions from transportation added in.
One suggestion is to tax carbon at the point of consumption, but it's much harder to track the amount of carbon expended on a finished item (including all the raw materials, manufacturing, shipping, packaging, etc.) than it is to calculate it at the point of the carbon emissions. A tariff on imports to account for carbon might violate WTO rules.
We've seen in the past situations where US rules for labor conditions, child workers, toxic chemicals, etc. are more strict than other countries and result in manufacturing being outsourced to laxer nations. This has hurt American manufacturers, but at least the US has gained the benefit of its regulatory regime. Here, because carbon output is a borderless problem, the US could face the cost of its regulations without any of the benefit.
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