International trade

The 2022 Inflation Reduction Act, President Joe Biden’s landmark climate law, is now expected to prompt a trillion dollars in government spending to fight climate change and trillions more in private investment. But the law and Biden’s broader “buy American” agenda include measures that discriminate against imports. One year in, these policies, such as the law’s electric vehicle subsidies, appear to be succeeding at growing domestic clean energy industries – consider the US$100 billion in newly announced battery supply chain investments. But we believe the law also clearly violates international trade rules. The problem is not the crime but the cover-up. Today’s trade rules are ill-suited for the climate crisis. However, simply tearing them down could hinder economic growth and climate progress alike. If U.S. leaders instead take responsibility for forging an improved international trade system – rather than denying the violation...

The European Union is embarking on an experiment that will expand its climate policies to imports for the first time. It’s called a carbon border adjustment, and it aims to level the playing field for the EU’s domestic producers by taxing energy-intensive imports like steel and cement that are high in greenhouse gas emissions but aren’t already covered by climate policies in their home countries. If the border adjustment works as planned, it could encourage the spread of climate policies around the world. But the EU plan – which members of the European Parliament preliminarily agreed to on Dec. 13, 2022 – as well as most attempts to evaluate the impact of such policies, is missing an important source of cross-border carbon flows: trade in fossil fuels themselves. As energy analysts, we decided to take a closer look at what including fossil fuels would mean. In a newly released paper, we analyzed the impact and found that including fossil fuels in...