Climate change : the case for a carbon tariff/tax

Canada's ratification of the Kyoto Protocol will not adequately address the country's contribution to global climatic change. This paper proposed a 2-tier system consisting of internationally imposed carbon import tariffs combined with an equivalent domestic carbon tax. The approach was designed to engage global exporters and importers, while also involving governments and policy commitments related to emissions and cap-and-trade systems. Although a carbon tax on emissions is preferable to an opting-in approach, Canadian government has rejected carbon taxes due to the suspicion that Canadian companies will easily circumvent regulations. It is anticipated that many companies in carbon tax compliant countries will outsource production to non-compliant countries. The proposed approach required that carbon taxes will be applied to all domestically produced and consumed products, while tariffs will be levied against products from exporting firms. Outsourcing to take advantage of lax environmental policies in pollution havens will be subject to a carbon footprint tariff. The tariff will also serve to reduce the carbon content of exports. Proceeds of the tax can be used in a variety of ways to reduce greenhouse gas (GHG) emissions. It was concluded that Canada will need to supplement domestic carbon taxes with a proposed carbon import tariff. 1 fig