A Carbon Tax as a Driver of Green Technology Innovation and the Implications for International Trade
Energy Law Journal, Vol 35, No. 1 (2014)
25 Pages Posted: 6 Jun 2014
Date Written: June 4, 2014
This article addresses the important role for the United States in developing new technologies that can address climate change by reducing carbon dioxide (CO2) emissions, particularly given its capacity for research and development (R&D) and innovation broadly. The article explains how U.S. climate change policy has begun to grasp this opportunity by supporting clean technology R&D using measures such as grants, subsidies, and low interest loans. Pricing carbon will complement these government policies and further drive green technology development. A price on carbon would also have a range of implications for clean technology innovation and international trade. For instance, a carbon price will lead to growing U.S. demand for green technologies to reduce CO2 emissions, which will incentivize greater levels of global R&D into such technologies. But to maximize the benefits to the United States and globally from the impact of a carbon price on R&D will require a complementary trade policy that lowers barriers to trade in climate change goods and services. At the same time, a carbon price will raise domestic concerns in the United States about carbon leakage and a loss of international competitiveness that is likely to lead to domestic pressure on the government to raise trade barriers on goods from countries not pricing carbon. Effectively managing the global impact from a U.S. carbon price on international trade will determine whether pricing carbon supports trade liberalization and drives greater levels of innovation and R&D or whether it becomes a reason for raising barriers to trade that reduce U.S. and global welfare.
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