Risks and Side Effects of Eco-protectionism

Reinhard Bütikofer

May 17, 2010
Reinhard Bütikofer
On the day climate negotiators met in Copenhagen, economist and Nobel laureate Paul Krugman’s op-ed in the New York Times demonstrated that much has changed in two years of climate debate – and that there actually is hope that we may “save the planet.”

Krugman's op-ed was titled “An Affordable Truth,” alluding to Al Gore’s Oscar-winning film “An Inconvenient Truth.” Al Gore, in 2006, wanted to raise awareness of the impending climate disaster. Krugman, in 2009, states that a reduction in greenhouse gases is not only necessary, but also affordable. Even better: It will help us overcome the economic crisis.

This new economics-based approach, also known in green circles as “green new deal,” opens for climate politics the way to alliances with a majority appeal. The results of the Copenhagen conference have to be measured against the degree to which they will, or will not open up competition for energy and resource efficiency.

It would be fun to laugh with Krugman about conservatives who claim the market can achieve everything – except prevent climate change through emissions trading that puts a price on CO2. Yet, such a debate is rather for the United States. In Europe, especially in Germany, business has gone beyond that. The business community knows about smart green technologies, heat insulation, renewable energies, power-heat coupling, even about energy efficient transport. It has been told by consultant after consultant that a green market economy will create numerous jobs. Craftspeople, too, have come to recognise that hope for their respective trades is “green.” In order to eradicate energy wasting antediluvians, we have to tackle the following question: Is it a precondition for the ecological modernisation of “our” economy that we have to thwart less ecologically oriented competitors – that else might undercut our costs?

In earlier pieces, Krugman has answered this in the affirmative and added that climate-based tariffs against carbon leakage, i.e. the shifting of emissions abroad, had to be brought into compliance with WTO rules. I do not want to categorically nay-say this but point out a number of serious political risks:

Firstly, European industry has already been granted a number of exemptions from emissions trading and thus achieved considerable cost advantages. Additional climate tariffs would not be legitimate protection but protectionism.

Secondly, important industries such as car manufacturing have unfortunately already won pyrrhic victories against modernisation. Protective tariffs would only further encourage such obstructive behaviour.

Thirdly, important sectors that have to become more energy efficiency, construction for example, do not face international competition.

Fourthly, economic isolation is in skewed discrepancy to the necessity to internationally co-operate in the fight against climate change.

Fifthly and finally, it is not the aim of an ecological transformation to preserve existing economic imbalances in order to reinforce a one-sided orientation towards exports.

The fact that there is a debate about the best economic strategy for green innovation is auspicious; such controversy is always welcome.

Green New Deal / Great Transformation