Fighting Climate Change Through Trade

The Climate crisis is spiraling out of control, writes Julian Zelizer. Recent heat waves in India and Pakistan saw temperatures over 120 degrees Fahrenheit. Yet, policy response in the United States has been halting at best, if not counterproductive. For example, the deal between the U.S. and the EU aims to decarbonize two heavy carbon-emitting industries, steel and aluminum production.

HOW TO MAKE METAL GREEN

The United States and the European Union have signed an accord to curb carbon emissions from steel and aluminum production. These industries are among the top emitters of carbon dioxide, accounting for a tenth of all emissions globally, or roughly that of the entire country of India, with its population of over 1.3 billion people. The agreement is, in principle, open to any country that wants to join and embrace these obligations. Consumers will feel little pain from attempts to decarbonize the metals industries, according to a report by a public-private coalition. A slight increase in cost will account for a significant reduction in emissions, as steel accounts for ten percent of the emissions from car production and 44 percent from wind technology.

TAMING THE MARKET

Washington’s trade deal with China marks a departure from decades of dogmatic trade policy that surrendered undue power to the market and hollowed out the state. In recent decades, states have left economic decision-making primarily to market actors and focused policy instead on insulating these actors from popular democratic demands. These neoliberal theories have also influenced how many economists and policymakers have approached climate change. For example, a 2019 letter signed by more than 3,600 economists in the United States championed the carbon tax as an alternative to the “command and control” regulation of the Environmental Protection Agency. Likewise, the EU has implemented a carbon pricing mechanism known as the Emissions Trading System that depends on the market. Price mechanisms are helpful but must be part of a broader strategy that seeks to do what the market cannot.

U.S.-EU deal on steel and aluminum is a step in the right direction, writes Julian Zelizer. He says hybrid approaches combine pricing mechanisms with other policy tools, such as procurement or public investment. Zelizer: Creating coalitions of winners from energy transitions can help overcome political blockages. He argues that a trade pact could fruitfully put a price on imports whose embedded emissions exceed those of domestic producers.

GLOBALIZATION FOR THE COMMON GOOD

Policymakers on both sides of the Atlantic should push for an ambitious agreement that models how international trade cooperation can be a force for decarbonization. Rules should be implemented to ensure that metal producers use green electricity in their factories and green technologies along their value chains. The United States must complement the accord with domestic measures, including advance purchase commitments for green metals through the Defense Production Act.

If done right, the global arrangement could provide a template for a new form of economic integration for other industries. Action in one or two industries has helped encourage deeper trade cooperation in the past. Cement, chemicals, fertilizers, and forestry products are excellent candidates for a second phase. With calls for “deglobalization” advancing, the arrangement could encourage a new, more sustainable model of globalization.

This article was published on www.foreignaffairs.com with the title “Fighting Climate Change Through Trade”

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