Tariffs and Climate Change
Many economists argue that the tariffs mooted by the new U.S. administration are likely to decrease economic growth relative to a scenario without additional tariffs.
Would tariffs at least slow the pace of climate change and other ecological crises, simply by decreasing the growth in carbon-intensive economic activities? Probably not.
In April of 2018, a group of climate scientists, economists, and energy system modelers laid out and named five socioeconomic scenarios ("Shared Socioeconomic Pathways") that researchers could use as shorthand in policy discussions.
With a trade war looming, this scenario jumps out as eerily relevant today:
A resurgent nationalism, concerns about competitiveness and security, and regional conflicts push countries to increasingly focus on domestic or, at most, regional issues. Policies shift over time to become increasingly oriented toward national and regional security issues. Countries focus on achieving energy and food security goals within their own regions at the expense of broader-based development. Investments in education and technological development decline. Economic development is slow, consumption is material-intensive, and inequalities persist or worsen over time. Population growth is low in industrialized and high in developing countries. A low international priority for addressing environmental concerns leads to strong environmental degradation in some regions.
The modelers named this scenario "Regional Rivalry – A Rocky Road" and characterized it as presenting "High challenges to mitigation and adaptation". Dr. Simi Thambi, an economist, explains why:
Mitigation is very challenging in this scenario because reducing emissions is more expensive, as investments needed to scale clean technologies are not prioritised. As a result, these technologies fail to penetrate well into the markets that need them most cost-effectively. For example, according to the International Energy Agency’s (IEA) 2024 electric vehicle outlook, electric vehicle sales in emerging markets remain very low. Lowering global emissions without greening the transport sector in developing economies would be highly challenging.
Adaptation also faces considerable challenges in [the Regional Rivalry scenario], because one can expect deforestation and cropland expansion to rise in this scenario, as countries focus on their national ambitions. Extensive deforestation would reduce ecosystems and biodiversity, reducing their adaptive capacity.