CO2 Trade War Hits Midwest

CO2 Trade War Hits Midwest

It’s round one in the 2010 fight against global warming and Minnesota has landed the first punch against coal-fired electricity that crosses its borders. The state is seeking to place a tariff on carbon dioxide turned out by coal plants in North Dakota.

While there has been a lot of huffing and puffing about carbon tariffs in the past from countries that want to stick a tax on items that are produced in polluting industries, Minnesota’s move is the first of its kind.

Currently, the law does not mandate a carbon tariff; it only provides the framework to create such a pricing mechanism if a tax on carbon emissions becomes necessary in the future. Minnesota is currently looking at pricing guidelines for a likely utility rate increase in 2012.

Minnesota is hoping to pressure its neighbor to the west to drop coal and embrace renewable energy sources. North Dakota has ample wind energy potential and has even been called the “Saudi Arabia of Wind.”

The fee, which would function similar to a regular tax, could range from $4 to $34 per ton of carbon dioxide emissions that is produced by coal-fired power plants in North Dakota. Currently, there are seven operating coal plants and six active coal plant proposals in North Dakota, according to CoalSwarm, an information portal on coal issues.

Many economists and climate scientists have argued in favor of a global carbon tax. Paul Krugman of The New York Times, for example, has advocated for imposing a carbon tariff on China in hopes it will help the country curb their growing carbon output. Likewise, consumer advocate Ralph Nader has supported a carbon tax and is in opposition to a market based carbon-trading system.

“A tax on CO2 emissions – not a cap-and-trade system – offers the best prospect of meaningfully engaging China and the U.S., while avoiding the prospect of unhinged environmental protectionism,” wrote Nader and Toby Heaps in a December 2008 issue of The Wall Street Journal. “An effective, harmonized tax on C02 emissions must stabilize the growth of atmospheric concentrations of GHGs [greenhouse gases] by no later than 2020. The tax must also be adjusted annually, by a global body, according to this objective.”

Minnesota’s proposed law is not exactly a tax on carbon, but the effects are essentially the same and North Dakota officials are none too happy with the prospect. Coal energy is one of the largest industry bases in the state.

Minnesota is set to handle legal tussles and has allocated $500,000 to fund any forthcoming court proceedings. North Dakota is now in the process of suing Minnesota over the tariff, arguing that the fee would “discourage coal-powered electricity sales in favor of renewably powered electricity.”

While this is exactly what Minnesota is attempting to do, North Dakota might have a good case against the so-called tariff, which would end up being paid for by Minnesota utility payers.

According to Article 1, Section 10 of the United States Constitution, “No State shall, without the consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection laws …” If such an argument holds up, the carbon tariff could be deemed unconstitutional if not accepted by Congress.

This is not the first time carbon tariffs have been met with outrage. Last July, the United States Chamber of Commerce spoke out about the prospect of taxing imports from polluting countries.

“We urge the Senate to refrain from including provisions that could negatively impact U.S. relations with key trading partners and disrupt the global trading systems,” the US Chamber of Commerce, the National Foreign Trade Council, and two other groups wrote in a letter to Senate leaders. “Climate change is a global problem that calls for international cooperation, not unilateral ultimatums.”

The scientific community views the issue quite differently. According to Physicians for Social Responsibility, coal pollutants damage every major organ in the human body and contribute to four of the top five leading causes of death in the United States, not to mention climate change.

North Dakota ranks No. 8 in the US for the levels of toxic metals in the state’s coal waste.