Breaking finance and business news, tax information, jobs and more for finance directors and senior finance professionals.

Tax

Carbon tax proposed for emerging markets

Thursday, 27 March 2008

Page 2 of 2

The report notes that given the overall energy inefficiency of the Chinese economy, a carbon tariff, coupled with triple digit oil prices, suddenly redefines the meaning of Chinese competitiveness.

For many industries, what will count is how energy efficient they are, and how carbon efficient they are in their use of energy. On both counts, China and the rest of the developing world are hugely disadvantaged.

As a result, China's wage advantage would be lost for many energy-intensive industries who will then look to return home to the US.

Environmentalism to become signifant barrier to trade

Rubin expects Chinese exporters of chemical products, with their astronomical energy intensity factor, will be the first to see their businesses migrating back.

In fact, chemical exports from China to the US are already slowing down notably, with shipments in the past two years rising by only half the pace seen in the first half of the decade.

Non-metallic mineral products (cement, glass, lime, etc), with energy intensity 130 per cent higher than the Chinese industrial average, along with printing, primary metal manufacturing and machinery industries are other candidates for such realignment.

"With OECD's carbon tolerance diminishing with every tonne of CO2 spread into the atmosphere by non-OECD countries, environmentalism will soon become a significant barrier to trade," Rubin adds.

"A carbon tariff imposed by the US on emissions embodied in Chinese exports would not only abolish the implicit subsidies on the carbon content currently enjoyed by Chinese exports, but it would be large enough to start reversing current trade and offshoring patterns," he concludes.

Related articles

Related links