Carbon tariffs in China

Countries such as Canada and the United States may start imposing a "carbon tariff" on goods from China and other developing countries which have become the biggest contributors to global greenhouse-gas emissions, CIBC World Markets said Thursday.

The investment bank's report says China, India and other developing economies have expanded so massively they have surpassed the established industrialized world in belching out carbon dioxide pollution blamed for climate change.

"And once surpassed, the gap is growing rapidly," wrote economists Jeff Rubin and Benjamin Tal.

"Already, non-OECD emissions are a massive 2,500 million metric tonnes more than the OECD – a gap that is now equal to almost 20 per cent of the latter's total emissions."

With advanced countries enacting carbon taxes, carbon trading systems and other measures to lower emissions, Rubin and Tal believe the growing pollution from poor countries will provoke penalties against their exports.

Many in the West assumed that since industrialized nations were primarily responsible for the historical build-up of greenhouse gases in the world, they should bear the brunt of efforts to cut back, a view that underpinned the Kyoto Protocol in 1997, which exempted developing countries.

But the CIBCWM economists see a shift in sentiment.

"As the OECD countries begin to impose greater economic sacrifices on their own economies as part of decarbonization efforts, tolerance for the carbon practices of its trading partners, or more precisely the lack thereof, will diminish dramatically," they write.

"Already Europe, which is well ahead of North America in terms of domestic carbon pricing, is talking about a carbon tariff that it can apply to imports from countries that don't play by the same carbon rules."

They add that the concept is likely to gain currency in the U.S. and Canada.

The report fingers China as the world's top greenhouse-gas polluter, surpassing the U.S. and pulling away.

Since the beginning of the decade, it says, China's emissions have increased about 120 per cent and are greater than Canada, India, Spain and Japan combined.

A key reason is China's reliance on heavily polluting coal. As a result, Chinese emissions per unit of energy are double those of Canada, the report says.