What do you think the consequences would be if – in order to meet climate change objectives and encourage counties with high emissions to change – the U.K. applied quotas and tariffs on all imported goods (eg from China, USA, India etc) made using fossil fuels. I would expect price/cost increases, shortages, less choice for importers and consumers. Plus reciprocity in the form of trade wars – effecting our exports. What think you?
Thanks Paul. First, I’m in favour of carbon taxes in principle – they are a textbook solution to the problem of environmental externalities. The difficulty comes when trying to apply them in practice. In some cases it is relatively straightforward. For example, we have a pretty good idea of how much harm is done by flying. But it is much harder in the case of imports from other countries, when we don’t have such good information. It doesn’t make sense to impose a blanket tariff on, say, imports from China, when even the same item could be produced to very different standards by different Chinese companies. I’d also be worried that governments would use carbon taxes as a form of protectionist tariff.
Plain-speaking Economics 
What do you think the consequences would be if – in order to meet climate change objectives and encourage counties with high emissions to change – the U.K. applied quotas and tariffs on all imported goods (eg from China, USA, India etc) made using fossil fuels. I would expect price/cost increases, shortages, less choice for importers and consumers. Plus reciprocity in the form of trade wars – effecting our exports. What think you?
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Thanks Paul. First, I’m in favour of carbon taxes in principle – they are a textbook solution to the problem of environmental externalities. The difficulty comes when trying to apply them in practice. In some cases it is relatively straightforward. For example, we have a pretty good idea of how much harm is done by flying. But it is much harder in the case of imports from other countries, when we don’t have such good information. It doesn’t make sense to impose a blanket tariff on, say, imports from China, when even the same item could be produced to very different standards by different Chinese companies. I’d also be worried that governments would use carbon taxes as a form of protectionist tariff.
LikeLiked by 1 person