Climate Protectionism?

Tyler Cowen criticizes the Waxman-Markey bill for imposing tariffs on goods from countries that do not reduce their greenhouse gas emissions. (See also VC contributors linked at the end of this post (and scroll down).) Tyler gives lots of good reasons why trying to punish (say) China would be counterproductive. Clearly, doing so is not costless: we can punish China only at great cost to ourselves in the short term. But the fact is that there is no alternative.

To see why, recall that climate change is a collective action problem. In the most extreme form of the problem, a single nation or a group of nations can do nothing about climate warming, because if they tax emissions (directly or through a cap and trade scheme) industry will simply migrate to other countries and export back to the regulated countries. Costs go up, with no gain for the climate.

In an ideal world, a treaty would be negotiated, one that would require all states (or, at least, all states capable of hosting industry) to reduce emissions. States like China would have to be persuaded that they can

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