As world dignitaries converged for a United Nations summit to address keynote issues such as global warming, one nation, China, is fully set to explode in economic growth should measures in the developing world find their way to law.
The Green Debate
A cap and trade measure is the type of law most likely to be found in the developing world. As nations discuss new initiatives to curb the use of traditional energy sources, taxation is at the forefront. In the United States, a cap and trade bill was written and has found itself in political limbo. The new law would tax carbon emissions through a marketplace similar to that already present in the European Union.
Essentially, world governments decide how much of a pollutant can be released, and they credit manufacturers with a certain polluting power each year. Should one company use less credits than it is allocated, it has the right to sell those credits to other heavier polluting companies. Corporations would simply trade the ability to emit pollutants, and the government would be able to tax through the sale of credits and limit emissions by the total number of credits available in the system.
Relating the system to the name, the cap is the limitation of pollutants, while the trade is the free trade of carbon credits between those who are allowed to trade on the exchange. Ultimately, a new exchange would have to be crafted in the United States, but first, the legislation will have to find its way into law.
Where Borders End
United Nations summits are not at all binding. The United Nations, being a creation of a multitude of world governments, cannot enforce policy from one sovereign nation to another. As such, handshakes and agreements made at the summit mean very little. Often, a politician will speak one tune at the summit before heading home with another. Ultimately, no nation is forced to make a decision, and many haven’t. Of the main protesters to climate change legislation are developing nations; China, India and others fear limitations on their own natural resource utilization could affect domestic trade.
The War on Development
One of the largest criticisms of cap and trade taxation is that it does not bode well for the economic growth of a nation. This couldn’t be truer; consider the industrial revolution in the United States and England. Tons upon tons of coal and other primitive energy sources were devoured in a race to build industry from top to bottom. While the environmentalists are right about acidic rain and other ecological conditions damaging the natural health of a nation, the pollution does not hurt the bottom line and standard of living. Even today, China, one of the biggest users of coal, relies heavily on fossil fuels to provide energy to its massive manufacturing sector. A cap on carbon could ultimately hurt China’s ability to provide goods cheaply; when measured by percentage points, the nation utilizes more fossil fuels than any other country.
China Won’t Agree to Carbon Caps
It is very much a safe bet that China will not agree to impose its own carbon tax legislation. The nation, which has been the most outspoken critic of the change, has much more to benefit by avoiding legislation.
A cap and trade law in the United States will increase the cost of energy, which will then affect the price of exports to other nations. Although the US exports very little compared to what it imports, China’s story is very much different. In keeping its costs low, as costs in other nations rise, China’s trade balance will work heavily in their favor.
Tariffs Mean Nothing
The second half of many trade proposals is to enforce tariffs on nations that do not enact carbon taxing legislation. However, for a nation like China, this shouldn’t come with any additional expense. The populace is more than capable, and funded, to purchase goods made in the country. In addition, lower prices on products means a more obtainable standard of living and a healthier economy. While other nations are seemingly shooting themselves in their economic foot, China will be empowered domestically and grow internationally.