Report: carbon tariffs could bring manufacturing jobs back from China
Via Greenwire (sub rqd), a new report from Canada-based investment bank CIBC shows that if the U.S. passes domestic carbon caps, and China doesn’t, and the U.S. responds with "carbon tariffs," it could spark a return of manufacturing jobs:
The report finds that a carbon tariff, combined with triple-digit oil prices, “could reverse the migration of certain manufacturing industries that have left North America for much cheaper labour markets in China.”
“Wage advantages may no longer be as decisive in determining overall competitiveness for energy-intensive industries in today’s energy-starved world economy,” the report finds. “All the more so if exports from those industries will be assessed relatively punitive tariffs for their carbon content upon entering North American or Western European markets.”
[CIBC chief economist Jeff] Rubin, in an interview, was more succinct. “All of sudden,” he said, “maybe you don’t want your steel plant in China.”
His report notes that other developing countries could also face disadvantages, but singles out China because of its growing energy use and reliance on coal in particular. Coal, the most carbon-heavy major energy source, provides about two-thirds of China’s total energy needs and roughly 80 percent of its electric power, the report states. And export-related emissions account for 27 percent of China’s total emissions, CIBC finds.
Rubin says industries that would take part in his predicted reverse migration would be energy-hungry sectors like chemicals, metal manufacturing, cement, glass and others. The report finds that if carbon were priced at $45 per ton in the United States, applying this cost to Chinese goods would raise about $55 billion per year from Chinese exports to the United States, the equivalent of a 17 percent tariff.
This would seem to invalidate a common conservative argument, doesn’t it? That passing carbon policy without China’s participation will put us at a competitive disadvantage?