A Better Carbon Emissions Tariff

In the first few months of his second term, President Trump invoked the 1977 International Emergency Economic Powers Act (IEEPA) to place tariffs on products imported to the US from nearly every country in the world. In a 7-4 ruling, the Supreme Court upheld a lower court decision striking down those tariffs. As Trump continues to fight to keep his tariffs in place, the Wall Street Journal Editorial Board recently published an opinion column considering the possible repercussions of a Trump victory on the matter.

“If Mr. Trump gets away with his IEEPA tariffs,” the Editorial Board wrote, “what’s to stop the next President from using the law to put tariffs on countries with high CO2 emissions? It isn’t hard to imagine a Democrat in the White House declaring a global climate ‘emergency’ and arguing that because this counts as ‘foreign policy,’ judges should give a pass.”

What if, instead of declaring emergencies and granting presidents — of either party — this kind of sweeping executive power, there was an actual science- and math-based attribute that could be used to impose carbon emission-based tariffs?

This is exactly what ICEMAN’s Carbon Factor Indexing methodology can offer. When I met with members of the Norwegian Parliament, I discussed ICEMAN with a member of the Standing Committee on the Environment. “We don’t know the carbon footprint of the products we are importing,” he told me. “If we know what the Carbon Factor Index (CFI) values of the products are, we can establish a tariff system on imported products below a certain CFI value.” He said implementing ICEMAN would allow Norway to impose tariffs on products from countries such as China, who aren’t subject to the Cap & Trade mandates imposed on European countries. If their products have a lower index number — indicating higher CO2 emissions were emitted in their production—they would be subject to the tariff.

I hadn’t considered using ICEMAN in this way — but it makes sense. I often hear the argument that reducing our carbon footprint in the US — or in any other country—makes no sense when other countries, such as China, continue to increase their carbon emissions. In fact, China’s carbon emissions are increasing so exponentially, they may completely wipe out any reduction in the global carbon footprint made by the rest of the world.

The way to convince China’s manufacturers to reduce their carbon emissions is to tariff their products when being imported to countries who have made a commitment to cut carbon emissions. The U.S. could implement a regulation requiring a Carbon Factor Index number on all imports entering the country. This would incentivize manufacturers in foreign countries who export to the U.S. market to reduce their carbon footprint far better than government or international mandates.

Even without a regulation from the federal government, ICEMAN can influence manufacturers in countries like China who import to the U.S. If consumers in the U.S. start buying products with higher CFI values, manufacturers in China will have to reduce their carbon footprints and get better CFI values in order to remain competitive in the marketplace. This will in turn impact the carbon footprint of the entire country — even going so far as to fundamentally change its infrastructure. For example, a manufacturer in China consuming electricity from a coal-fired grid will be pressured by market forces to install renewable energy to be able to compete against U.S. manufacturers that are on a renewable grid or that have already installed renewable electricity.

If implemented in the United States, the impact of ICEMAN will extend far beyond this country. What the U.S. does, Europe will follow, and the rest of the world will too. It’s not too far-fetched to say when the U.S. adopts ICEMAN, it may have a global impact on reducing carbon emissions worldwide.

Manufacturers worldwide will have to reduce their carbon footprints in order to be competitive in the world market. Market forces alone will pressure other countries to invest in renewable energy infrastructure. As manufacturers gravitate toward regions with low-carbon infrastructure, companies that want to attract business and industry will have to step up.

It is possible that entire countries will attract industry based on their low-carbon infrastructure. For example, Norway, which has a 99 percent hydroelectric grid, doesn’t currently have much industry. In fact, Norway’s biggest export is oil. Norway isn’t competitive in the world manufacturing market because labor costs are relatively high—but once the marketplace really starts to consider carbon footprints, Norway will become much more competitive due to its 99 percent renewable grid. Even if companies are paying a little bit more for labor, it will be exceeded by the overall competitive advantage they’ll gain in the marketplace as a result of ICEMAN.

Countries with high-carbon infrastructure, meanwhile, will come under pressure to rebuild their infrastructure to be more carbon neutral, to prevent industry from moving away. And developing countries will have an incentive to build low-carbon infrastructure to attract industry to help develop their country. When I was invited to speak in Myanmar, the term “leapfrogging” was used, meaning building a renewable infrastructure without making the same mistakes industrialized countries made in their beginnings.

The U.S. could encourage this by requiring every product imported into the country to have a CFI value on it. They wouldn’t have to mandate products that have a CFI above a certain level; market forces would take care of that. All they would have to mandate would be that the product simply has to have an Index value.

I don’t particularly care how governments use the Carbon Factor Index. I’m not a legislator or policy maker; I leave that in the hands of the experts. But I believe ICEMAN offers the United States the opportunity to become a leader in reducing our carbon footprint. We can show the world how combatting climate change can be accomplished in a free market economy.

Frank Dalene, an Amazon Best Selling Author in Green Business & Environmental Economics titled, Decarbonize The World: Solving The Climate Crisis While Increasing Profits In Your Business, and Founder of the Hamptons Green Alliance, a 501(c)(3) Public Charity. Learn more at frankdalene.com and hamptonsgreenalliance.org.

Countries with high-carbon infrastructure, meanwhile, will come under pressure to rebuild their infrastructure to be more carbon neutral, to prevent industry from moving away. And developing countries will have an incentive to build low-carbon infrastructure to attract industry to help develop their country. When I was invited to speak in Myanmar, the term “leapfrogging” was used, meaning building a renewable infrastructure without making the same mistakes industrialized countries made in their beginnings. 

The U.S. could encourage this by requiring every product imported into the country to have a CFI value on it. They wouldn’t have to mandate products that have a CFI above a certain level; market forces would take care of that. All they would have to mandate would be that the product simply has to have an Index value.

I don’t particularly care how governments use the Carbon Factor Index. I’m not a legislator or policy maker; I leave that in the hands of the experts. But I believe ICEMAN offers the United States the opportunity to become a leader in reducing our carbon footprint. We can show the world how combatting climate change can be accomplished in a free market economy.

Frank Dalene, an Amazon Best Selling Author in Green Business & Environmental Economics titled, Decarbonize The World: Solving The Climate Crisis While Increasing Profits In Your Business, and Founder of the Hamptons Green Alliance, a 501(c)(3) Public Charity. Learn more at frankdalene.com and hamptonsgreenalliance.org.