Goods Manufactured with Carbon Emissions - Essay Example

Running header: 30% penalty duty on imports manufactured with more than 3% carbon emissions Executive summary The government has proposed a plan to introduce penalty duties of 30% on all manufactured imports where the importer fails to prove that the producer is reducing its carbon emissions by at least 3% per year. The plan is aimed at fighting global warming from an indirect angle through trade. The government has set goals that it will achieve if the proposed plan is accepted. Key among them is reduction of effluents release, adoption of clean energy, elimination of cheap counterfeit products from the market among others. The proposed plan has attracted a lot of criticism from business analysts, economists, environmentalists and the general public. The plan will affect the lives of the general public in terms of costs of commodities in the local markets and loss of jobs. Economically, the amount of imported goods will decrease and trade balance might shift to the exports. There are scholars who have come up with better proposals that the government should go through and determine which one is most viable. The proposed plan has its pros and cons but the pros outweigh the setbacks. It is in everyone’s best interest to fight global warming at any cost. The government should look into providing compensations to the affected bracket of the citizens by the proposal. There should also be tax cuts introduced if the proposed plan takes effect. The government should also provide incentives to business firms to reduce emission of carbon. Introduction The British government has been working on reducing air pollution for decades. Environmentalists have made sure that the government keeps on its toes on the issue of emissions especially from manufacturing plants within the country. Emission of carbon and other gases that pollute the air and consequently contribute to the rise in global warming are being discouraged. To address this, the government has devised incentives that will ensure that local manufacturing industries adhere to the newly drafted emissions law. Companies are required to purchase permits from the required authorities according to their level of emissions. Global warming is a global issue hence the British government in conjunction with other countries worldwide has engaged in talks on the most feasible way to tackle emissions. It is during these talks that the participants devised a strategic plan that will ensure that every individual and company observes the requirements of emissions. The following report to The National business league will focus on the proposed plan to introduce penalty duties of 30% on all manufactured imports where the importer fails to prove that the producer is reducing its carbon emissions by at least 3% per year. The proposed plan The government has proposed a plan to introduce penalty duties of 30% on all manufactured imports where the importer fails to prove that the producer is reducing its carbon emissions by at least 3% per year. This means that before investors sign their importation documents, they will be required to thoroughly scrutinize the annual carbon emissions percentage of the manufacturer they are importing goods from. If the manufacturer’s carbon emissions reduction is lower than 3% annually, then the importer will have to bear the pinch instead by paying a tax of 30% of the total value of goods imported. Carbon is among the harmful gases to the atmosphere (Tyler, 2008). Carbon taxes are levied on carbon fuel. Most manufacturing facilities use hydrocarbon fuels that emit carbon and other effluents. The release of the greenhouse gases potentially affects the climate and contributes to global warming. It is for this reason that the government is planning to impose a penalty duty on importers so that they can demand for a reduction of emissions from their suppliers. All the governments in countries taking part in the fight against global warming advocate for the use of clean fuels like solar, wind and hydropower in their manufacturing industries (Pearce, 2005). The British Government has forwarded the proposal to the relevant trade sectors and if the proposal is accepted by the majority, then it shall be implemented with immediate effect. The plan has received varying reactions from the public. Some claim that it is an oppressing strategy for the traders whereby they are required to pay for something they haven’t contributed to (Makower, 2005). They claim that the tax should be forwarded to the manufacturer instead. Others claim that it is a viable plan and it should be implemented. As much as global warming is a worldwide issue, there are those who are fueling it more than the rest. The Government’s Aims The main aim of introducing the penalty on importers is to make the pollution on the manufacturers end cost effective. Emission of greenhouse gases should be decreasing with time for every manufacturing industry in the world. Doing business with companies that do not observe this policy poses a negative effect on the climate. In order to discourage this, the government is indirectly imposing bans on trade with such irresponsible companies since most traders, if not all, will stop business with them (Kelley, 2006). Carbon taxes are a type of pigovian tax in tax economics. They are aimed at settling the cost of production that pollution brings along. Since the exporting company on the other side fails to pay for this cost, the government is introducing this policy to balance the cost. Somebody has to pay for the negative cost of pollution and since the government cannot directly tax manufacturers from various parts of the world, it is introducing the tax on the importers. This equates the marginal cost of damage done to the atmosphere (Bradsher, 2007). Another reason for introducing the proposal is to hit two birds with one stone. According to Ron Kurtus, manufacturers should do anything to satisfy their customer needs (Kurtus, 2007). In cite of this, the government aims at putting pressure on the importers which will in turn ensure that the importers demand for a reduction in emissions by their suppliers. The strategic plan has a very high chance of success since the manufacturers will have to reduce their carbon emissions. The British government also aims at reducing the amount of counterfeit goods being imported into the country. According to BBC News, the amount of counterfeit goods being seized in the country keeps on escalating (BBC News, 2012). This is due to the cheap importation prices of the goods since most of the manufacturers are unlicensed and fail to observe the global emissions reduction targets. The importer taxing plan will therefore ensure that traders import goods from legitimate companies. The plan is going to be implemented by other governments and the government wants to be counted as part and parcel in the fight against global warming. The target is to ensure that the developing countries upgrade their emission percentages by financing them to purchase better equipments for their manufacturing industry (Bradsher, 2007). The duty imposed on importers will go a long way into the same course of donating advanced machinery to the poor countries. The government also hopes to create balance in the market through this plan. Traders who import legitimate goods from companies that observe the eco-friendly policies of reducing emissions pay more for the imports. This is because the source companies obviously have included the extra cost of managing effluents in the price of their exported goods. Consequently, the traders make less profit as compared to the rest who import goods from manufacturers who don’t take part in the fight against global warming. The penalty duty will however balance this and at the same time discourage the importation of the cheap goods (Bradsher, 2007). The British government also wants to lead by example. It wants to be the first administration to implement the strategic plan that will mobilize other countries in the world to take to the steps. The fight against global warming needs a daring authority that will not be shaken by criticism. The proposed plan will provide an invisible platform for individual countries to indirectly tackle the hazardous emissions problems in other countries (Kloor, 2009). The government is also counting on the fact that if the proposal is accepted, the consumers will have an option to choose which products to use. The consumers are free to avoid products whose prices might be affected by the proposed tax. The tax proposal is very open and clear to the businesses and they are also free to escape or absorb it. The proposal is simply based on individual choice and not a forced choice. Therefore if it is accepted, it will only affect those who choose to consume the affected imported products (Julie, 2010). General arising concerns The proposed tax plan on importers has attracted criticism from a wide spectrum of critics. This includes nongovernmental companies, economists, and individual investors among others. Their grievances are similar and are all embedded on excessive taxation. They argue that by implementing the plan will be discriminative to a certain class of traders. They further claim that different manufacturing companies have different emission reduction goals that they have set and it can not necessarily be more than the 3% annually (Powels, 2010). The British government’s new proposal to impose a 30% duty on the importer who fails to prove that the manufacturer is reducing their carbon emissions by at least 3% per year, has attracted a lot of criticism from the business group. Concerned business executives claim that it is not their duty to reduce carbon emissions; rather it is the authorities in the countries where the goods are manufactured in that should impose the penalty duties on the respective companies (Dingell, 2007). There is also the issue of cost. Most businesses that are involved in importations are against the proposal since it will significantly increase the cost of importation. Most of the companies worldwide are struggling to attain the 3% reduction bar in carbon emissions. Therefore, it is difficult for importers to avoid the penalty duty. Business persons also claim that it is impossible to shift from one manufacturer to another. According to Obinna Heche, businesses should stick to one supplier and build a good relationship (Heche, 2012). There are also concerns that the plan will scare away foreign investors. The cost of maintaining investor businesses will definitely go up if their importations are affected by the proposed policy. This might see the foreign investors shifting from the country to relocate elsewhere (Heche, 2012). 30% duty on imports is a significant amount of money that might see prospective investors shy away from doing business in the country. This will leave a mark in the country’s economy in the long run. Like any other taxes, the importers will find a way to go around it and escape it. False information might be given to the government concerning producers’ reduction on carbon emissions. The government does not have means of proving or disproving information from foreign companies (Julie, 2010). Unless the government intends to set up investigation sites in the foreign countries, to investigate on all the companies that export goods to this country, then the plan is just gibberish. The cost of implementing the investigations would also be unreasonably high. The proposed penalty duty is discriminating. There are small scale importers who solely depend on goods they import from the manufacturers that will cause them to fall in the tax trap. Such business persons will be knocked off the trade whereas there are other huge businesses who will not even feel the effect of the duty. The proposed plan should not generalize the tax rate (Julie, 2010). Policy Effects on the industry The policy will not only affect the export and import industries of all countries involved. New strategies will have to be formulated if the initial economic growth goals are still to be achieved. For instance, if the policy is implemented, the amount of imported goods will reduce in the industry (Cowen, 2010). This might cause a significant imbalance between the exports and imports resulting to a crisis that will affect the economy of the country. It has also been argued that carbon taxes will result to investment firms relocate to countries where they are lower or totally absent (Heche, 2012). This will in turn cause job losses among the people who work in the firms. Many countries who have also adapted the policy are facing similar resistance since hydrocarbons are widely used by manufacturing companies and it would be costly to start using clean fuel. The government is however positive that this won’t be the case and that the policy will do more good than harm. The carbon tax if adopted will affect the prices of imported goods even if the producers start adhering to the 3% annual effluents reduction policy. This is because the involved companies will have to invest in cleaner energy and their initial cost is very high. The cost pinch will be extended to the importers and ultimately to the last consumer of the goods who is the individual citizen. The policy is biased according to citizens but it is aimed for a good course (Cowen, 2010). The business enterprises in the country will face fierce competition from other international companies (Findley, 2009). The affected corporations might be forced to cut on their Corporate Social Responsibility program budgets. Most companies opt to reduce on their giving when their financial performance is threatened by an increase in production cost. If this happens to be the case, then the local businesses are bound to perform lower than expected and their status worldwide might depreciate. Loss of jobs is inevitable in both the importers side and their producers on the other side. Some investors who import cheap goods will be knocked out of the business by the proposed policy. As their investments crumble down, their employees will go down with them. On the producer’s part, the introduction of clean fuel will see them lay off a lot of employees because the clean fuel does not require a lot of labor for maintenance. The cost of installing the clean fuel systems will also dictate that the companies reduce their labor force to finance it (Pearce, 2005). On a small scale effect, the proposed plan will act as a motivation to the businesses to work harder in order to maintain their status and achieve their goals (Kurtus, 2007). The competition bar will definitely go higher. Businesses will have to put up with the proposal if it is passed into law. In order to raise the required funds to pay for the penalty duty, they will have to make more money. This might even result to the businesses expanding and subsequently creating job opportunities. Economists are also concerned that the proposed plan might negatively affect the country’s annual total in GDP. The GDP might record a rise from the past years if the total value of imported goods goes down. Imports are deducted while calculating the gross domestic product and the bigger the value of imports, the less the GDP. The equilibrium between the country’s imports and exports might shift to the exports and this will mean that more money will be injected into the economy (Cowen, 2010). Social effects of the policy The increase in cost of commodities that is bound to happen in the local markets is likely to pressure the lower class. The poor people in the community already have too much on their plates and the proposed plan might add to their financial troubles. This will mean that some people in the society will be unable to purchase certain household commodities if the government doesn’t step in to compensate them with tax reliefs or subsidize the market prices of basic commodities (Bradsher, 2007). The proposed plan will also act as an incentive for the local manufacturing companies to uphold social ethics and keep plummeting their emission percentage. The proposal might also be extended to the local industries on their manufacturing sector (Reid, 2009). This will ensure that the environment is conserved by reducing air pollution. People will enjoy the fresh air and a good climate. The value gained from the reduction of carbon emission will be enjoyed on a worldwide scale. The proposal is aimed at the social welfare of other countries. This shows that the government is not only concerned with the welfare of its citizens but also the welfare of the entire world’s population (Tyler, 2008). The plan will ensure that other countries adopt the carbon emission reduction policy by force if they want to continue participating in business with the traders they export their goods to. The governments involved will also have to introduce carbon taxes if they have not already done it. Suggested modifications to the government proposal Critics claim that various manufacturing companies worldwide are taking action to reduce their carbon discharge percentages but at varying amounts annually. There exist companies who have set goals to reduce effluents release by slightly lower percentages than the 3% but at least they are trying (Kanter, 2010). Therefore, the proposed plan should be edited to read “The government is proposing to introduce penalty duties of 30% on all manufactured imports where the importer fails to prove that the producer is trying to reduce their carbon emissions annually. Reviewers also claim that there are no specific methods to measure carbon release by manufacturing companies. Therefore the government should provide their own techniques of measure which the importers will propose to the manufacturers. Failure to this, the proposed plan should not specify the quantity of reduction; rather it should just impose a ban on importers who get their goods from companies that have not adopted reduction of effluents release (Whitten, 2009). The government is aiming at accountability, which is a good course but that does not help in the fight against the environment conservation (McGee, 2010). It is very costly for manufacturing companies to exclusively start using greener fuel. The government should review the proposal and draft a side plan to use the funds collected to finance the donation of equipment to the developing countries that will enable them to use green fuels. This way the government will make a more significant contribution to the fight against global warming. Instead of abandoning the companies, the British government should help them. Some organizations have criticized the proposal as being biased and that its aims are not going to be realized. In support of their sentiments, they claim that the proposed penalty will just ruin business partnerships between traders and their suppliers. It is expected that most importers will abandon their suppliers to escape the tax. A cut in trade will mean that the affected companies will not have the funds to invest in clean energy. The proposal therefore indirectly implies that these companies will have to close down due to the high prices of fuel (Wilson, 2006). Proposed Alternative plans There are individuals and groups that are completely against the proposed penalty duty plan and they have gone ahead and forwarded their own alternative plans. They believe that their plans will have a much better and logic effect. For instance there has been a proposal that the government should advocate for carbon auctions worldwide. The idea is for all companies to agree on a certain price that a company should pay if their effluents release exceeds a certain point. The price will be so high that most companies will have no choice but to adopt cleaner energy fuels (Julie, 2010). Another alternative plan would be to draft a progressive penalty tax on importers. Importers have different financial capabilities. Just as income duty is taxed on a progressive rate, the carbon tax on importers who fail to prove that their suppliers are reducing their annual effluent release, should be progressive. This will translate to a policy whereby the more the taxed goods a trader imports, the more the duty they pay. This will provide a fair tax rate across the board (Julie, 2010). Bans would also work as a good alternative. The irresponsible companies should be completing banned from supplying goods in the country and everywhere else in the international market if possible. This will make them consider taking responsibility and they will have little options. The companies will therefore strive to reduce their effluent levels in order to get back to the international market zone (Dower & Zimmerman, 1992). Conclusion The above proposal is just one of the many potential plans that can be implemented to positively contribute to the fight against climate change due to global warming. Its adoption will see to it that importers are accountable to their suppliers’ carbon reduction policies. If the proposal is rejected, then the government can opt to address the contentious issues that have been brought by the proposal. The government should go ahead and edit the required sections of the proposal so that it can attain support from the majority of the people. Otherwise, there are alternative proposals that have been forwarded and others might still be forwarded. Recommendations Due to the many issues arising from the proposed penalty duty on importers who fail to prove that the goods producers are reducing their carbon emission by no less than 30% annually, the following recommendations have been made to the government. They are aimed at filling the loopholes that critics have pin pointed in the proposal. Compensation The government should see to it that the affected commodities in terms of cost are subsidized. If not so, the government should compensate the citizens by lowering the prices of certain basic household commodities so that the overall bills for family upkeep won’t be affected. Tax cuts The government should introduce a tax cut equivalent to the general cost of implementing the proposed plan. This should be introduced especially on individual income of the people in the lower class so that they won’t be affected by the inevitable price hike of commodities. Incentives The British government should devise ways to come up with incentives for importers to keep off goods whose production process raises environmental questions. The government should try to hold discussions with other countries to entice their manufacturing companies to take responsibility for pollution. References BBC News. (2012). Tourists warned over fake goods, U.K, BBC News. Retrieved from: http://news.bbc.co.uk/2/hi/8215519.stm. Bradsher, Keith. (2007). UN program to fight global warming is target of criticism, The New York Times. Cowen, Tyler. (2010). Why does a rise in imports lower gdp? Marginal Revolution. Retrieved from: http://marginalrevolution.com/marginalrevolution/2010/09/why-does-a-rise-in- imports-lower-gdp.html. Dingell, John D. (2007). The Power in the Carbon Tax. Washington Post. 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