Proposed “Green” Tax Unlikely

Source: Mandelson to reject 'green' tax proposal - FT.com

Concerns are rising in Europe that Kyoto compliance costs are putting European industry at a competitive disadvantage with the United States and other nations that have no signed the environmental protocol. As a countermeasure, French officials, supported by the EU’s industry commissioner, are proposing a “green” tax on goods from countries that have not ratified the Kyoto treaty.

Petr Mandelson, the EU trade commissioner, is quick to underscore the impracticality of the “green” tax approach for two reasons. First, such a tax would be impermissible under WTO rules; non-participation in Kyoto is not illegal and cannot be punished by trade sanctions. Second, there is a practical problem in determining which goods to tax. Mandelson provided two examples: the U.S. has not ratified Kyoto, yet some individual states have equally stringent environmental standards; on the other hand, China has ratified Kyoto, but, as a developing country, does not face the same environmental requirements. Rather than a tax, Mandelson favors positive incentives for environmental compliance, including removal of all tariffs on renewable energy and clean power generation equipment.

Questions

Are signatories to the Kyoto protocol placing their industry at a competitive disadvantage? Should nations be allowed to use tariffs to compensate for voluntarily-assumed environmental compliance costs, or is that the cost of doing the “right” thing?