Can ‘Climate Sanctions’ Save the Planet?

Can ‘Climate Sanctions’ Save the Planet?

Can ‘Climate Sanctions’ Save the Planet?

Economic pressure can be a force for environmental good—if it targets companies, not countries.


In recent months, popular demands for bold action on climate change have grown significantly. Although Western policy-makers are paying more attention to the environment, they are busy managing destabilizing tensions in trade and geopolitics. The Trump administration has adopted the most protectionist posture of any American government in over 50 years, imposing major tariffs on China, Europe, and other trading partners. The United States has also escalated its use of economic sanctions against adversaries (Iran, Russia, North Korea, and Venezuela) and erstwhile allies (Turkey) alike.

The chaos caused by these tariffs and sanctions are a shock, but they also present an opportunity. By upsetting liberal elites with his erratic use of tariffs and sanctions, Trump has shown that the US state still has considerable power to shape the terms of economic globalization.

Although Trump is unlikely to choose this path, there are possibilities for the progressive fight against inequality and climate change here. Advocates of a Green New Deal are proposing ambitious domestic plans for investment, taxation, and redistribution, and are beginning to consider the design of a green international order. So how could interventionist policies like tariffs and sanctions be made to work in support of this internationalist agenda?

One possibility, currently being debated in the European Union and also widely endorsed by US economists, is a carbon border tax. As a tariff on goods made by carbon-intensive industries such as steel, aluminum, and cement, this measure stops “carbon leakage” that occurs when national emissions rules are undermined by imports from high-carbon economies elsewhere. It also provides an incentive to foreign countries to adopt greener production chains lest they lose competitive access to the EU’s 500-million-strong consumer market.

Trade policy is a promising domain for speeding up the energy transition. But as the Roosevelt Institute’s Todd Tucker has pointed out, the existing carbon-friendly WTO rules must be suspended or changed to allow carbon tariffs. He has proposed that the global Green New Deal coalition could maintain a free trade zone among its members while imposing tariff barriers against recalcitrant carbon-emitting states. British political economists Peter Newell and Andrew Simms have put forward the idea of a Fossil Fuel Non-Proliferation Treaty modeled on nuclear arms control agreements, in which countries would commit to leaving their fossil fuels in the ground.

The crucial question is how such agreements can be enforced. Sanctions expert Edoardo Saravalle has argued that US economic statecraft shows that “green sanctions” could work. But while the idea of green sanctions is important to consider, we should be careful about learning the right historical lessons. US sanctions usually fail to compel other states to change their behavior. In most cases, they stimulate nationalism and increase economic inequality. Their long-term costs are grievous, and borne overwhelmingly by the weakest and poorest members of society. This is a moral and political impasse that a global Green New Deal should take great pains to avoid.

More directly, the Western record of using sanctions shows that when applied to entire nations, they tend to accelerate climate degradation. Interwar German firms pioneered the use of fuel hydrogenation techniques to turn coal into oil. The Nazis shared this know-how with other countries that were coal-rich but oil-poor. Fascist Italy, imperial Japan, and Franco’s Spain all responded to Western energy sanctions by promoting self-sufficiency in fuel production, at tremendous economic and environmental cost.

After World War II, apartheid South Africa developed hydrogenation to withstand decades of boycotts and sanctions; the world’s largest coal-to-liquids firm, Sasol, is still one of the premier employers in South Africa today. Even tiny North Korea has braved recent UN and US oil sanctions by stimulating gasification and hydrogenation plants—some of them built by the Japanese in the 1930s—to turn its gargantuan coal deposits into oil and gas. Iran has already suffered grievous economic, social, and environmental damage under US sanctions. But the Islamic Republic has nonetheless survived, in part by shipping oil to China and smuggling it into to Pakistan in jerricans packed on dirt bikes by the thousands.

Most existing economic sanctions, therefore, aggravate the climate crisis instead of solving it. Many suffer from the same problem as Trump’s tariffs: They target nation-states and national economies as single units. This does not just have grievous consequences for the environment—the Trump tariffs, for example, contributed directly to the Amazon forest fires this summer by diverting Chinese demand for soybeans from the Midwest to Brazil. It also misunderstands the nature of modern globalization. Most decisions about profit, technology, and investment are no longer made by national governments, but occur in corporate supply chains and are spread through the infrastructural and technological networks that they use.

US sanctions have proven disappointing in their ability to change the policies of other states, but they have exerted a major influence on private entities such as corporations and banks. Even poor states can withstand sanctions for much longer than the largest multinational firms and banks, which operate under tight cash-flow constraints and are highly vulnerable to financial pressure. For many European banks the mere threat of sanctions has been enough to force their withdrawal from targeted countries.

Green sanctions could work if applied at the right scale: to companies, instead of countries. The challenge is to figure out how to apply this insight to the complex case of China, the country that is most crucial to a global energy transition. The difficulty is that the climate problem emanating from Chinese growth is both caused and being addressed by the state-owned enterprise (SOE) sector.

China is responsible for over a quarter of global carbon emissions and is the world’s largest coal consumer. The most polluting oil, gas, electricity, and construction firms are state-owned. But the transition to clean energy is also being driven by state-owned companies. The PRC leads the world in solar technology, in production and sale of electric vehicles, and has the largest reforestation program. Throughout most of China, renewable energy prices are now competitive with fossil fuel–generated energy. State-owned enterprises have made progress but are still far away from making renewable energy dominant. Much of the transition hinges on linking inland “battery provinces” to coastal population centers through high-voltage transmission infrastructure. Whatever the path taken by global climate action, one of its goals should be to persuade Beijing to speed up and expand this process.

One approach is for the United States and European Union to use markets to induce the Chinese government to expand its greening efforts. China’s desire to expand its global economic presence means that the conditions of its access are major points of leverage for the West. Much of the Chinese economic expansion in the last decade was financed with cheap credit, so the state will need new sources of revenue to phase out coal plants more quickly. In this situation, Western carbon border taxes can spur the PRC’s transition to renewable energy: offering tariff reductions in exchange for Chinese greening.

Yet there are limits to what the pressure of tariffs and the coercion of sanctions can achieve. On the whole, provision is more effective than deprivation. What would have real effects on the speed of the global energy transition is the organized transfer of green technology from Western states to Latin American, African, and Asian countries—a Green Lend-Lease program abroad to accompany the Green New Deal at home. Private-sector technology transfer has been part of the UN’s climate agenda since the 1990s. But investors have often been reluctant to share proprietary technologies, and the sums committed to green growth in developing countries have been paltry. Both public investment and a more pragmatic attitude to intellectual property rights can help spread green technology. A coordinated Western investment offensive in renewables is also the only way to ensure that China’s Belt and Road Initiative does not worsen the state of the environment.

After years of Trumpian unilateralism, a mobilization against climate change could help restore international cooperation between the United States, Europe, China and the rest of the world. The problems posed by the climate crisis and international oligarchy cut not just across foreign policy and domestic economics, but also across national borders. Progressives are uniquely equipped to keep both in clear sight.

If the Green New Deal wants to go global like the original New Deal did in the 1940s, it will have to adapt old policies to current circumstances. Part of this means accepting that the West cannot solve or even effectively mitigate the climate crisis by itself. Green New Dealers should consider recasting the tools of US hegemony, beginning with carbon tariffs and corporate sanctions. But that is only the beginning of the road to a green egalitarian internationalism.

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