Are Carbon Tariffs Protectionism or Climate Policy?

September 19, 2017
Illustrated image of buildings releasing carbon into the air.

David Drake of Harvard Business School weighs in

Harvard Business School

Some argue that carbon tariffs — carbon costs imposed on imports entering an emission-regulated region — are simply protectionism being peddled as climate policy. Our results suggest otherwise. The implementation of a carbon tariff decreases global emissions relative to equivalent settings without a carbon tariff. Domestic firm profits, on the other hand, can increase, decrease, or remain unchanged due to a carbon tariff. In short, the principal benefit gained through a carbon tariff is not the protection of domestic firms' profits. Rather, it is an improvement in emissions regulation efficacy, with carbon tariffs enabling emissions regulation to deliver reduced global emissions in many settings in which it would otherwise fail to do so. This video weighs in by summarizing findings from the paper "Carbon Tariffs: Effects in Settings with Technology Choice and Foreign Production Cost Advantage" by David Drake of Harvard Business School.