One of the big issues being debated in New Zealand right now is how to keep New Zealand industry in New Zealand when the Government's emissions trading regime renders them non-competitive internationally. Some say that free allocation will help. Others say that a border tax adjustment is the answer (imported products not subject to a cap and trade regime or carbon tax would be charged a special tariff equivalent to the New Zealand emissions trading regime cost and exports wwould bee given a subsidy or rebate on the New Zealand domestic charge) .
Canada is seeing a similar debate. This article from the Financial Post is spot on. It suggests that the persuit of these policies would result in globaal trade wars. It also notes that it would be illegal under World Trade Organization (WTO) rules to impose a tariff on imports if the purpose was to offset what Canada might consider lax environmental and other non-tax policies in foreign countries. If China fails to regulate its coal sector so as to reduce carbon emissions, Canada cannot raise tariffs on Chinese goods imported into Canada.
