Key Takeaways
The global economy is far too complex for central planning by the United Nations or any other entity.
U.S. attempts to reduce domestic CO2 and inflate the cost of CO2-intensive imports is a recipe for economic deindustrialization, particularly as other nations inevitably game the regulations for business gain.
A previous IER post identified the proposed PROVE IT Act as a “thinly veiled attempt to foist a domestic carbon tax and ‘border adjustments’ (tariffs, quotas, or both) on the U.S. economy.” Worse, PROVE IT would be the U.S. part of an UN-led initiative to politicize global trade to penalize CO2 emissions and thus energy and economic progress.
While the U.S. would have a tariff surcharge on entering crude oil and petroleum products, for example, other countries would tax such U.S. exports. As a net exporter of oil and particularly liquified natural gas, the U.S. ends up as a big international loser.
Next, consider the complexity, bureaucratization, and administrative waste of international tariffs, given the 82 percent share of oil, natural gas, and coal in the world energy market.
With nearly 200 political jurisdictions and hundreds of potentially covered products (PROVE IT lists but 22), the number of pricing interrelationships for regulators would be quadrillions of quadrillions. So, the first step of global central planners would be to reduce the number of both political blocks and covered products, a very arbitrary and contentious exercise.
Politics would continue with considerations of pragmatism and equity. Expect the U.S. to exempt imports from Canada and Mexico for starters, as was done under the Mandatory Oil Import Program of 1959. Expect vital, politically strong products and sectors to receive special treatment.
How should imports from poorer countries with less CO2 usage per capita be penalized relative to richer countries with higher usage, particularly since the latter have so much more historic emissions? Social-justice issues collide with climate policy.
Who-monitors-what per political jurisdiction and per product? How are revisions made given that unforeseen change occurs as soon as the ink is dry on current assignments?
Who regulates the regulators? What are the costs of legal challenges to the assignments? And most fundamentally, why does PROVE IT tag CO2-intensive goods as “dirtier production”? Carbon dioxide is odorless, colorless, tasteless, and nonflammable. CO2 is laboratory demonstrated to improve plant productivity and resiliency. It is not a criteria air pollutant like ground-level Ozone (O3), Particulate Matter (PM), Carbon Monoxide (CO), Lead (Pb), Sulfur Dioxide (SO2), and Nitrogen Dioxide (NO2).
U.S. attempts to reduce domestic CO2 and inflate the cost of CO2-intensive imports is a recipe for economic deindustrialization, particularly as other nations inevitably game the regulations for business gain. This outcome is ironic as the U.S. would ecologically industrialize its surface area, the living space, with wind, solar, and battery installations.
False Promises
Proponents of PROVE IT use such arguments/terms as “climate competitiveness”, “the U.S. carbon advantage”, “superior carbon efficiency of vital American industries”, “climate-forward data transparency”, “bolster American manufacturing, energy production”, and “protecting workers and businesses from unfair tariffs and foreign competitors seeking to undercut them”. Each is either a false hope or a misstatement of fact. Global climate policy is futile and wasteful, assaulting the very energies that consumers prefer. Economic progress would be sacrificed, victimizing consumers and burdening taxpayers.
Conclusion
Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency Act of 2024 (PROVE IT) is a leap down the road to serfdom, giving global standing to Al Gore’s “central organizing principle of the world community”. The complexity of a global international trade regime is staggering; never has such a regulatory program been contemplated, much less initiated.
The global economy is far too complex for central planning by the United Nations or any other entity. Consumers direct the international division of labor from the bottom up. What is decentralized, evolutionary, and undesigned cannot be rationally run from the center. As noted by Don Lavoie:
If the guiding agency is less knowledgeable than the system it is trying to guide—and even worse, if its actions necessarily result in further undesired consequences in the working of that system—then what is going on is not planning at all but, rather, blind interference by some agents with the plans of others.
The Trojan Horse of PROVE IT, as described elsewhere, “would lead to new taxes on Americans, drive up prices, punish energy use, and legitimize extreme climate policies.”
