From Watts Up With That?

Essay by Eric Worrall

Climate subsidies like the Biden Inflation Reduction Act violated international free trade rules. The green solution: Get rid of free trade.

The US broke global trade rules to try to fix climate change – to finish the job, it has to fix the trade system

Published: September 5, 2023 10.31pm AEST
Noah Kaufman Research Scholar in Climate Economics, Columbia University
Chris Bataille Adjunct Research Fellow in Energy and Climate Policy, Columbia University
Gautam Jain Senior Research Scholar in Financing the Energy Transition, Columbia University
Sagatom Saha Research Scholar in Energy Policy, Columbia University

The 2022 Inflation Reduction Act, President Joe Biden’s landmark climate law, is now expected to prompt a trillion dollars in government spending to fight climate change and trillions more in private investment. But the law and Biden’s broader “buy American” agenda include measures that discriminate against imports.

One year in, these policies, such as the law’s electric vehicle subsidies, appear to be succeeding at growing domestic clean energy industries – consider the US$100 billion in newly announced battery supply chain investments. But we believe the law also clearly violates international trade rules.

The problem is not the crime but the cover-up. Today’s trade rules are ill-suited for the climate crisis. However, simply tearing them down could hinder economic growth and climate progress alike. 

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The Inflation Reduction Act contains a fundamental contradiction. Its promise to reduce global greenhouse gas emissions relies on the rapid diffusion of technologies, knowledge and finance across borders. Yet, its domestic subsidies may accelerate the adoption of trade barriers that inhibit these same cross-border flows, thus slowing progress on climate change.

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New rules could limit and define the appropriate use of green subsidies, carbon border tariffs, export and import controls and supply chain coordination. For example, the U.S. and other developed countries could agree to limit subsidies’ domestic sourcing requirements to only emerging, innovative clean technologies that require public support to commercialize. Building on this, all countries could work toward an explicit list of clean energy, transport and industrial technologies needed by all that can be traded with reduced or minimal tariffs. 

…Read more: https://theconversation.com/the-us-broke-global-trade-rules-to-try-to-fix-climate-change-to-finish-the-job-it-has-to-fix-the-trade-system-212750

The academics claim they don’t want to get rid of free trade, but if they truly believe this is their position, the academics are kidding themselves. “Appropriate use of green subsidies” would be a trade protectionism enabling clause.

Any subsidy could be packaged as an energy efficiency development initiative. Any import tariff could be spun as a climate protection measure, to prevent the import of unacceptably energy intensive goods, or punish manufacturers or miners who were deemed to be too carbon intensive.

Sure such measures could be challenged – through expensive litigation, against government agencies backed by infinite legal resources, and no sense of urgency.

You can have free trade or you can have protectionism. You can’t have both, especially if you try to differentiate between which trade is free and which trade is protected with a test as nebulous as “appropriate use of green subsidies”.

If you doubt such vague clauses would be abused, consider that the very title of the “Inflation Reduction Act” is an absurd exercise in spin. Who nowadays believes the act had anything to do with inflation? The Biden regime’s laughable continued attempts to deny the act of giving massive subsidies to domestic businesses is a violation of international trade rules tells us all we need to know about how any future clauses which enable manipulation of trade rules would be abused.

And of course, let’s not forget how enormously profitable manipulation of such trade protection enabling rules would be for corrupt politicians. As P J O’Rourke once said, “When buying and selling are controlled by legislation, the first things to be bought and sold are legislators”.

Lucky the USA doesn’t have any corrupt politicians in Washington, right?