Wonking Out: Two cheers for carbon tariffs

Saving the planet is more important than free-trade mysticism. 

View in browser|nytimes.com Continue reading the main story July 16, 2021 By Paul Krugman Opinion Columnist This time it really is Infrastructure Week. Democrats have agreed on the broad outline of a big public investment program, to be passed through reconciliation on top of a much smaller bipartisan "hard" infrastructure program. As I noted in my column yesterday, big spending has gotten its groove back. But there has been another major policy development: It's Infrastructure Week, but it's also Carbon Tariff Week. The Democratic proposal says in general terms, although without specifics, that we should levy tariffs on imports from countries that don't take sufficient steps to limit greenhouse gas emissions. On the same day, the European Union laid out, in much greater detail, plans to impose a carbon border adjustment mechanism — which I'm afraid everyone will call a carbon tariff, even though CBAM is a great acronym. (See? Bam!) So how should we think about carbon tariffs? From past experience, I know that we'll hear a number of voices denouncing them as a new form of protectionism and/or asserting that they're illegal under international trade law. These voices should be ignored. First, let's talk about priorities, people. Yes, protectionism has costs, but these costs are often exaggerated, and they're trivial compared with the risks of runaway climate change. I mean, the Pacific Northwest — the Pacific Northwest! — has been baking under triple-digit temperatures, and we're going to worry about the interpretation of Article III of the General Agreement on Tariffs and Trade? Continue reading the main story ADVERTISEMENT And some form of international sanctions against countries that don't take steps to limit emissions is essential if we're going to do anything about an existential environmental threat. Developing countries, especially but not only China, are already responsible for most carbon dioxide emissions; even a big effort to decarbonize on the part of the United States and Europe will accomplish little unless it's matched by efforts in other nations. Furthermore, "industry will just move to China" is a favorite argument of domestic opponents of climate action, so the politics of such action depend crucially on having an answer to that claim. Given these considerations, it seems almost trivial to point out that carbon tariffs aren't actually protectionist and should be considered legal under international trade law. But I do think those are points worth making, if only because this happens to be a topic I've thought about and worked on for many years. To understand the law and economics of carbon tariffs, it's helpful to consider the economics and legality of value-added taxes (VATs), a major revenue source in many countries (although not the United States). Trust me, it's a highly relevant comparison. A VAT is, on paper, a tax paid by producers: If a country has a 15 percent VAT, a company that produces, say, furniture must pay a tax equal to 15 percent of its sales — minus the taxes it can show were paid by the companies selling it wood, fabric and so on. The advantage of such a system is that the private sector does a lot of the work of enforcement, since each company has an incentive to make sure that its suppliers pay their fair share. Continue reading the main story ADVERTISEMENT But who pays the tax in the end? Normally, all those taxes on producers end up being passed on in higher prices, so that a 15 percent VAT is, in effect, a 15 percent national sales tax. Now, VATs are always accompanied by "border adjustments": Importers must pay the tax on the goods they import, while exporters get a rebate equal to the tax paid on what they export. This makes perfect sense when you think of a VAT as a sales tax. You wouldn't want a situation where shoppers at Walmart pay sales tax only on American-made goods, while Chinese products are exempt. And you also wouldn't want to charge sales tax on U.S. goods being sold to other countries. This point is widely misunderstood. U.S. businesses, in particular, often look at the border adjustments imposed by countries with VATs and see them as tariffs and export subsidies that give their competitors an unfair advantage. They are, however, wrong on the economics. And the World Trade Organization considers VAT-related border adjustments legal, because they are necessary to carry out a domestic policy that, in principle at least, doesn't distort international trade. That is, border adjustments don't tilt the playing field; they actually level it. Subscribe Today New York Times Opinion curates a wide range of views, inviting rich discussion and debate that helps readers analyze the world. This work is made possible with the support of subscribers. Please consider subscribing to The Times with this special offer. Continue reading the main story ADVERTISEMENT So what does all this have to do with carbon tariffs? You can think of national policies designed to limit greenhouse gas emissions as ways to induce a country's residents to take into account the emissions resulting from the production of the goods they consume. This is obviously true if a nation imposes a carbon tax, or a cap-and-trade system, in which businesses must purchase licenses to pollute. It's also true, although in a harder-to-measure sense, when countries impose regulations like mileage and clean-energy standards. The point is that many climate-change policies can be seen as a form of tax on domestic consumers. And as with a VAT, both the economics and, I believe, the law (I'm not a trade lawyer, although I think I understand this issue) say that border adjustments, in this case a carbon tariff, are appropriate parts of a climate strategy. That is, if a country lacks an adequate climate policy, the price of goods imported from that country should reflect an estimate of the greenhouse gases emitted during their production. What might make carbon tariffs slightly trickier than VAT border adjustments is the likelihood that an important part of climate policy will involve regulations rather than a straight carbon tax. In that case, while a carbon tariff remains clearly justifiable as a way to level the playing field for domestic and foreign producers, setting the appropriate level of the tariff won't be easy — it won't be as simple as charging the same VAT rate on imports as that imposed on domestic products. A fair bit of estimation and imputation will be involved, and there will no doubt be arguments about the numbers. But while getting border adjustments right will be tricky, this trickiness isn't a reason to do nothing. Carbon border adjustments are clearly the right thing to do, and better to do them imperfectly than not at all. So two cheers for carbon tariffs. Wait — why only two cheers? Because carbon tariffs affect only goods that are exported and hence are only a partial solution to the problem of countries that don't do their part in reducing greenhouse gas emissions. Consider the case of China, which says that it plans to reduce emissions but is still building a large number of coal-fired power plants. If advanced countries impose carbon tariffs, this will give China an incentive to reduce the carbon dioxide emitted in producing its steel exports. But it won't impose any penalty for carbon emissions from the power plants that supply China's cities with electricity. And those emissions, which aren't related to international trade, are almost surely a bigger threat to the environment than emissions associated with exports. To fully address the problem of international cooperation, then, carbon tariffs that level the playing field wouldn't be enough. We'd have to go beyond that to the threat of sanctions against nations behaving irresponsibly. And that would, I'm afraid, be illegal under current trade law, because it would mean intervening in policies that have traditionally been considered purely domestic. Now, given the threat of climate change, our response should be to revise or ignore trade law. But that would be a big step and won't happen right away. For now, carbon tariffs are what we can reasonably expect to happen. And they should happen as soon as possible. Feedback If you're enjoying what you're reading, please consider recommending it to friends. They can sign up here. If you want to share your thoughts on an item in this week's newsletter or on the newsletter in general, please email me at krugman-newsletter@nytimes.com. Continue reading the main story Need help? 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The T List: Five things we recommend this week

Herbal wines, a hotel on the French Riviera — and more.

View in browser|nytimes.com Continue reading the main story July 14, 2021 Welcome to the T List, a newsletter from the editors of T Magazine. Each week, we share things we're eating, wearing, listening to or coveting now. Sign up here to find us in your inbox every Wednesday. And you can always reach us at tlist@nytimes.com. BOOK THIS An Idyllic Retreat on the French Riviera A view of the Saint-Tropez bay from the dining room of the Hotel La Ponche, which features a fresco by the artist Elvira Solana.Romain Laprade By Tom Delavan Continue reading the main story ADVERTISEMENT I often find myself in a beautiful place only to be told how much better it was decades ago. Fortunately, that's not the case when it comes to the recently refreshed Hotel La Ponche, a 21-room property in the historic part of France's Saint-Tropez. The space was redesigned by Fabrizio Casiraghi, whose deft interventions evoke a location's history: "Before it was jet-set, it was just for fishermen and visitors," explains the designer, who's been visiting the area since he was a boy. "There are parts of Saint-Tropez that are now bling-bling and parts that are effortlessly chic." His hope was to imbue the quaint hotel with the latter. Recognizing that La Ponche had good bones and an illustrious history — everyone from Picasso to Brigit Bardot to Simone de Beauvoir spent time there — he also conceded that it was looking a little tired. By reusing some of the old pieces of furniture alongside vintage and modern pieces, he gave the hotel a much needed face-lift. Its restaurant, called St. Germain des Pres, has a large terrace on the sea, and the bar is cozy, with oversize armchairs and a fireplace, while the rooms are light and airy, with travertine side tables and 19th-century desks. Rooms start at $700 per night, laponche.com. WEAR THIS A Vibrant Capsule Collection From Sacai and KAWS Looks from Sacai's collaboration with the artist KAWS.Courtesy of Sacai By Jameson Montgomery Throughout his career, the artist Brian Donnelly, known professionally as KAWS and currently the subject of a major survey at the Brooklyn Museum, has been known to collaborate with the world of design, adapting his work for a range of products, including fragrance bottles and album covers. His art is especially popular in Japan, where he's teamed up with fashion brands A Bathing Ape and Comme des Garçons, as well as the musician and designer Hiroshi Fujiwara, among others. This month, he'll add Sacai — the Japanese fashion label founded in 1999 by designer Chitose Abe — to the list, with the brand's release of a 60-piece capsule collection that transformed three original works by the artist into signature prints. Rendered in either a vibrant multicolor or a muted scheme of greens and browns reminiscent of combat uniforms, the collection runs the gamut of signature Sacai pieces, including a puffer coat that snaps at the side for a relaxed, voluminous silhouette, as well as a pleated floor-grazing skirt and high-neck romantic dress. From $70, bergdorfgoodman.com. Continue reading the main story ADVERTISEMENT DRINK THIS Herbal Wines Inspired by the Ancient World The first release in Cale's line of low-alcoholic herbal wines is a dry hibiscus pinot noir. A marigold flower blend is soon to come.Meiwen See By Michaela Trimble T Contributor For Nana Meriwether, her new brand of herbal wines, called Cale, is more than a line of low-alcoholic beverages. "As one of very few Black female winemakers in the country, it's my hope to inspire others while also offering a new way for everyone to imbibe more healthily," she says. Made in the Napa Valley and influenced by the ancient winemaking techniques of the Greeks, Romans and Egyptians, each bottle of Cale is produced by infusing traditional grape varietals like chardonnay, pinot noir, riesling and merlot with organic botanicals and adaptogenic and functional herbs such as lemon balm, ginseng, reishi and stinging nettle. The result is a healthier, more intentional drinking experience of light yet sophisticated wines that are naturally low in sugar and calories. The brand's first release is a dry hibiscus pinot noir with notes of wildflower and dark cherries, with a marigold blend on the horizon — a flower selected for its fortifying health benefits. From $25, drinkcale.com. TRY THIS All-Natural Face Oils for Every Skin Type Left: Skin, Undressed's Nightly Harmonizing oil. Right: Skin, Undressed's line of facial oils. Chris Yoon By Eleonore Condo T Contributor Continue reading the main story ADVERTISMENT Herbalist Hezi Badnany and designer Chris Yoon met at a dinner party in 2018 and bonded over a mutual love of skin care. Earlier this year, the duo transformed that common interest into a new business venture with Skin, Undressed, a line of herbal facial oils that deliver healthy, glowing skin. Each of their three products targets specific skin concerns: The Calendula Nightly Harmonizing Oil, with borage and horsetail, works to soothe and hydrate dry skin; the Meadowsweet Rescue Oil, with holy basil, which is high in salicylic acid, is ideal for acne-prone or problem skin; and the Gotu Kola and Rosehip Perfecting Oil is rich in vitamin C, making it the perfect everyday product for all skin types. Yoon and Badnany believe that what you put on your body is just as important as what you put in it: "A lot of people care about what they eat but don't really look at what's in their skin-care products," Yoon observes. "We're not going to use anything on our skin that we couldn't put in our mouths." From $48, skinundressed.com. BUY THIS Chunky, Pastel Rings Made by Independent Designers Clockwise from top left: Prounis, prounisjewelry.com; Brent Neale, similar styles at twistonline.com; Irene Neuwirth, ireneneuwirth.com; Deborah Pagani, deborahpagani.com; Jacquie Aiche, jacquieaiche.com; Temple St Clair, templestclair.com.Courtesy of the brands By Angela Koh With New York's ongoing heat wave, my go-to accessory is a cocktail ring (necklaces and earrings tend to stick to my skin). I love supporting independent female designers like Jean Prounis of Prounis Jewelry and Brent Neale, who both hand make everything in their Midtown studios. This Prounis ring, made with 22-karat recycled gold donned with a brown star sapphire, is both delicate and bold. Neale created an array of candy-colored statement rings, including a citrine cabochon stone surrounded by pink and orange sapphires. Another designer known for her whimsy is California-based designer Irene Neuwirth, who designed this one-of-a-kind green tourmaline surrounded by a halo of smaller pink tourmalines. For something not so precious but just as exuberant, check out Mounser's collection called ring pops, which were inspired by rave culture. FROM T'S INSTAGRAM The Making of Fall 2021 Couture A look from Dior's fall 2021 couture show.Courtesy of Dior With its emphasis on precision tailoring and unparalleled craftsmanship, haute couture has long allowed designers to indulge their most extravagant and exacting design ideas. This season was no exception. On T's Instagram Stories, we share what went into making some of the season's standout looks, from Armani's pleated tulle cape and skirt embroidered with hundreds of crystal drops to a Dior gown that required the efforts of 15 feather workers. For more, follow us on Instagram. Correction: Last week's newsletter misspelled the name of the designer Rejina Pyo's 4-year-old son; it is Luka, not Lucas. And if you read one thing on tmagazine.com this week, make it: Mari Maeda and Yuji Oboshi. Photo: Prisma Archivo/Alamy Stock Photo On Beauty In Praise of Sweat In many cultures, perspiring is seen as integral to physical and spiritual well-being. The latest related holistic products respect this natural process, and smell good, too. By Kari Molvar Continue reading the main story Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for The T List from The New York Times. To stop receiving these emails, unsubscribe or manage your email preferences. Subscribe to The TimesGet The New York Times app Connect with us on: Change Your EmailPrivacy PolicyContact UsCalifornia Notices The New York Times Company. 620 Eighth Avenue New York, NY 10018

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