An environmental tariff, also referred to as an eco-tariff or a green tariff, is a fiscal measure (in the form of either an import or export tax) imposed on goods with a substantial carbon footprint or goods imported from nations with inadequate environmental controls.
Supporters of environmental tariffs assert that these measures can effectively regulate global pollution by incentivizing nations to adopt more responsible environmental practices, thereby penalizing countries with lenient environmental regulations.
However, the impact of global trade on pollution levels remains a subject of debate among experts. While some argue for a definite correlation between increased global trade and environmental degradation, others contend that international trade contributes to economic growth, leading to higher living standards and subsequently encouraging advocacy for cleaner environments.
As stated in a World Bank paper: “Since freer trade raises income, it directly contributes to increasing pollution levels via the scale effect. However, it thereby induces the composition (and) technique effects of increased income, both of which tend to reduce pollution levels.”
Detractors of environmental tariffs raise concerns that certain standards may impose excessive burdens on emerging economies, potentially jeopardizing their economic stability.
The initial legislative proposal for an environmental tax was introduced in 1991 in the United States, targeting countries whose exports enjoyed significant cost advantages due to lenient environmental regulations.
The proposed legislation, known as the International Pollution Deterrence Act of 1991, sought to amend the “Tariff Act of 1930” to stipulate that a country’s failure to implement and enforce effective pollution controls and environmental safeguards would be construed as a subsidy granted by that country on its manufactured products. Consequently, countervailing duties on such products would be required.
