That is the topic of my latest Bloomberg column.  Here is one excerpt, starting with the basic idea:

Importers would have to register to receive authorization to import goods, and they would pay a tax per ton of carbon dioxide produced. These fees are intended to match those already applied within the EU, which are currently about 90 euros per ton. The policy is also intended to place EU industry on a more competitive footing and encourage foreign countries to adopt greener energy policies.

But will it work?:

But would it? Economic changes take place at the margin, and currently the EU is engaged in substitution toward coal, a very dirty energy source.

In light of that reality, consider the proposed tariffs as having (at least) two effects. First, they will push some production out of foreign nations and into the EU. Second, they will induce some foreign nations to move to greener energy sources over time, to avoid the tax.

In the short run, the first effect dominates: The tariffs will lead to more coal use and a dirtier energy supply.

Be suspicious of green energy policies which at first make the problem worse. However promising the longer-run promises may sound, there is always the risk that bureaucratic inertia will intervene and the short-run policy effects will dominate.

The rationale for the beneficial long-run effects of the tariffs is that foreign nations, including some relatively poor nations such as India, will move toward greener energy at a more rapid pace. That might happen. But look at the EU itself over the past year. Its energy prices went up, due to the Russian attack on Ukraine, but the EU did not move toward greener energy, such as more nuclear or wind power. It moved toward dirtier energy, in part because domestic interest groups opposed the more beneficial adjustments.

So, despite about as strong an incentive as possible — a war — the EU made the harmful rather than the beneficial adjustment. Now it is expecting that much poorer nations, often with worse governance structures, to do better. Not only is this naïve, but it is also protectionist.

And this:

Even the positive long-run effects are up for grabs. On one hand, the tariff hike provides an incentive to move toward greener energy. On the other, it makes the exporting nations poorer than they otherwise would be. Poorer nations tend to be less interested in improving their environments, as clean environments are largely a luxury good. And extreme poverty worsens other global problems, including issues stemming from migration. Should EU policy make it more difficult for Africa to industrialize?

One also has to wonder whether the promise of lower tariffs in return for greener energy is credible. Once protectionist measures are in place, they are hard to reverse. The EU would be reaping tariff revenue, and domestic EU industries would be receiving trade protection. Any reclassification of the imports as fundamentally “greener” would require an investigation across borders and clearance through multiple levels of bureaucracy. Such changes will not be easy to accomplish, especially in an era increasingly enamored of trade restrictions.

Worth a ponder.  EU coal consumption has been up over the last two years.  And what is relevant here is energy supply at the margin.

Matt Yglesias has a long post on that question, recommended albeit gated.  Matt’s take is hard to summarize, so I will provide a somewhat different view, though one that is still pro-YIMBY though with a different slant.

Without loss of generality, we can assume that sometimes “more building” raises rents and other times lowers them, or rents stay the same.

Let’s say there are no big “ideas externalities” from a new NYC apartment building, and as we put more of those buildings in, the rents fall somewhat. Furthermore, say we keep on building until those rents in NYC equal those in Nashville. There is gain on the inframarginal units of construction, but at the final margin the new building in NYC has about the same social value as the new building in Nashville.  The inframarginal gains are the relevant ones.

Now who gets those inframarginal gains?  If land is the truly scarce factor, as NIMBY critics suggest, landlords get a lot of them!  Nothing against that, I love landlords.  Still, that is a slightly different story from what you hear from the YIMBYs.  Landlords don’t get all of those gains, because the land scarcity constraint is precisely what is being relaxed.  But the available evidence seems to indicate you need to build a lot before rents fall much.  So landlords probably receive a healthy share of those new gains.  Rents may fall, but not by that much.  And so the gains for new urban entrants (who did not wish to migrate at the old rent levels) are correspondingly meh.

Again, let me repeat I love YIMBY and I love landlords.  You should too.

Alternatively, say you keep on building and the new residents bring lots of information externalities to the urban area — ever been to Seoul?  They have built like crazy and it is still quite expensive, all the more so in fact.  By building more, they made the land more valuable.  Good for them.  (NB: The biggest beneficiaries may be the rest of Korea, and K-Pop consumers around the world, not Seoul residents.)

Now who do you think reaps most of those gains?  Under standard NIMBY assumptions, I would think it is mainly the landlords.  Which is not to deny the residents receive some gains from increased product diversity in Seoul (good Thai food there now, etc.), and other non-primary effects.

It’s not all the landlords.  But still, the knowledge externalities make land in Seoul, in economic terms, more scarce.  The landlords will do really well.

When I read or hear YIMBYs, I often feel they have a public choice model of politics, slanted toward recognizing the influence of the landlords and homeowners, but not a comparable model of factor price incidence to boot.  They somehow want the lower rents and the positive information externalities both at the same time.  That to me seems unlikely.  And so it is harder to redistribute income away from landlords than you might think.

I again would stress that all the YIMBY changes are Pareto improvements here.  But the extreme remedies suggested by the Georgists, which to be clear I do not favor, are quite explicable to me.