The environment has already become a game changer in the economics of global trade with the Biden administration taking over in the United States. President-elect Biden has clearly stated his determination and promise to sign back into the Paris Agreement on his very first day of office.
It is so easy to expect that the Biden administration will be a new monitor and pioneer in relating economics to environmental issues. Unlike the outgoing Donald Trump, Biden has emphasized "net zero" ― reducing carbon emissions by the U.S. economy to zero by 2050.
In the course of removing coal and gas from the national economy along with cutting oil consumption heavily, Biden proposed a program to build a clean-energy economy by investing more than $200 billion in the fields of secondary batteries, electric cars and renewable energy over the next four years.
What is set as a standard in the U.S. soon becomes that of the world. Such an eco-friendly spirit is rippling across the Atlantic and affecting the EU. The European Commission has announced the European Green New Deal, a blueprint encompassing matters of climate change and the environment.
The EU not only aims to reduce carbon emissions by a large margin but also to become the world's first carbon-neutral continental area. The EU lifted up its emission reduction goal from 40 percent by 2030 to 55 percent. It also declared a plan to catalyze the development of renewable energy resources.
Furthermore, decarbonization of energy-concentrated industries, through policies to kick diesel and gasoline cars out of the market through exhaust gas regulations, is being highlighted and expected to expand. A budget of more than $900 million is to be allocated and executed to ensure all these measures are put into action.
This new paradigm of eco-friendliness in international trade is affecting almost every corner in the dynamics of the global economy. It is perfectly reasonable for countries pioneering the field to take such measures, as they are already equipped with advanced technologies and policies in the environment sector.
With the upholding of righteousness in "environmental justice," they are able to create jobs and industries as practical benefits. The environment is an area where budgets are to be consumed to boost the economy and create jobs in the expected coming era of low economic growth around the globe.
By demanding a similar standard of environmental regulations from trade partners, the EU and the U.S. can establish a brand-new concept of a trade wall, regardless of their goodwill. Despite all the fancy promises, such changes can hinder the very basic layout of trade and commerce in the world ― freedom of business and enterprise.
A carbon adjustment tax in the U.S. and a carbon border tax in the EU imposed on corporations failing to meet environmental standards could be an example of expansion on the environmental "enlightenment" that could possibly be forced onto other countries trading with them.
This will negatively impact underdeveloped countries whose main strength is in their manufacturing industries. Renewable energy demands high costs, resulting in the loss of price competitiveness.
The U.S. and EU should be aware of this backfiring of their measures and introduce the concept to the world as it grows and learns to take it on board. Environmental issues are not only measures to the boost economy but also to let it down.
Fortunately, many businesses are already making efforts to protect the environment by virtue of their own measures and capacities. The RE100 Declaration is a standard example of such. This is to attain 100 percent of electricity requirements of a corporation from renewable energy.
For instance, 787 global enterprises including Google, Apple, Microsoft, Nike and Amazon are on board with this. It is commonly acknowledged in global economies that it is better for the market to respond actively to the demands made on matters of environment from the administration.
It is important not to fail such readiness and eagerness of cooperation shown in the private sector by hastily imposing regulations and demands that cannot be met in an instant.
Keeping the spirit of free trade is just as important as the issue of protecting the environment. The world should not risk another blockage in the flow of free trade and commerce.
Eco-friendly management can only be possible under a thriving economy and the conditions at an individual company. Late concepts and issues in environmental regulation and administration are too fresh and sometimes progressive to be considered on a global scale. Unity in regulation may be powerful but often produces overkill.
In particular, tossing the burden of environmental regulation onto the pile of damage done by COVID-19 could do critical damage to the private sector.
Research shows that putting up with new environmental standards will impose a heavy load on many enterprises. The spirit of free trade must be highlighted and should be more effective in creating the change policies aim to bring.
Kwack Eun-kyoung (firstname.lastname@example.org) is secretary general of the Center for Free Enterprise (CFE).
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