Much ink has been spilled about tariffs and their effect on domestic and international economies, and that’s not the goal of this post. I want to explore recent U.S. tariffs through the lens of climate policy.

The recent announcement of U.S. tariffs on steel and aluminum marks a turning point in climate policy. These tariffs aren’t just about protecting domestic industries— are they signaling a shift toward using trade policy to enforce climate accountability? While not a direct substitute for carbon pricing, tariffs can serve as an effective proxy—forcing companies to internalize emissions costs, driving cleaner production, and discouraging carbon leakage.

With carbon pricing having mixed results gaining traction globally, tariffs offer a practical workaround, ensuring that companies and countries pay for their pollution. In a world where geopolitics increasingly shapes climate action, let’s aligns economic leverage with environmental responsibility.

Instead of waiting for a universal carbon tax or cap-and-trade system, the U.S. and other major economies can use border tariffs as a de facto carbon price—penalizing high-emission imports while incentivizing cleaner production.

Therefore, the question is no longer whether ‘carbon will be priced’, but rather ‘who sets the terms and who pays the cost’?

Why Carbon Pricing Has Stalled

Carbon pricing—whether through cap-and-trade systems or carbon taxes—has faced serious roadblocks:

• Political resistance: Policymakers fear backlash over increased consumer costs. We’re seeing this backlash in Canada. Up until very recently, the upcoming federal election was being fought around carbon pricing with one of the major parties promising to ‘axe the tax’.
• International disparity: Countries with weak or no carbon pricing create competitive imbalances. A quick search for ‘Paris accord Article 6 negotiations’ will yield plenty of analysis.
• Loopholes and exemptions: Even where carbon taxes exist, industries often secure exemptions, weakening their impact.

These challenges have made global carbon pricing uneven, creating incentives for companies to shift production to low-regulation regions—a phenomenon known as carbon leakage.

Tariffs: A Market-Based Alternative

While the February 2025 U.S. tariffs are not explicitly about carbon emissions, they can be compared to the EU’s Carbon Border Adjustment Mechanism (CBAM). CBAM functions as an implicit carbon price by applying import duties based on emissions intensity. Instead of direct carbon taxation, tariffs create indirect but strong incentives for cleaner production:

• Encouraging cleaner supply chains – Importers face a choice: decarbonize or pay up.
• Protecting domestic industries – Companies operating under climate regulations aren’t undercut by high-emission competitors.
• Driving global compliance – Nations without carbon pricing feel pressure to implement their own standards to maintain trade access.

The Case for Tariffs Over Direct Carbon Pricing

While carbon pricing has theoretical efficiency, tariffs provide real-world enforceability:

Criteria	Carbon Pricing	Carbon Tariffs
Political Feasibility	Often unpopular, requires broad policy reform	Easier to justify as trade policy
Competitiveness	Risk of offshoring emissions (carbon leakage)	Prevents carbon leakage, levels the playing field
Enforcement	Complex, requires domestic buy-in	Enforced at the border with clear cost signals
Global Impact	Requires widespread adoption	Encourages compliance via trade pressure

What This Means for Businesses

• Supply chain transparency will be non-negotiable. Companies will need verified emissions data to avoid tariff penalties.
• Could U.S. tariffs stimulate low-carbon innovation as a competitive advantage? Efficient production processes will lower tariff exposure.
• Trade dynamics will shift. At least as it relates to the EU countries with strong climate policies will become preferred suppliers over high-emission regions.

Tariffs aren’t a perfect replacement for carbon pricing, but they might be the most practical, enforceable path forward. As global trade adapts to climate constraints, tariffs can serve as a de facto carbon price—forcing climate accountability without the political baggage of direct taxation.