Energy Nationalism To the Rescue

The Russian invasion of the Ukraine has raised a new specter of energy nationalism. Although only the United Kingdom and the United States have gone as far as outright banning Russian oil and gas, other European economies, including Germany, are seriously discussing weaning off of their main energy supplier. This crisis offers politicians an important opportunity to reframe climate change policy by arguing for reduced dependence on foreign oil and pivoting to domestic renewable energy. My research into trade and business politics shows that building trade barriers against oil could cement a new and durable coalition in favor of higher gas prices uniting oil companies, conservationists and realpolitikers.

The idea of using trade measures to fight climate change is not new, though oddly enough, rarely implemented. European countries have proposed various sorts of carbon-weighted tariffs, and the World Trade Organization and the World Bank have long discussed liberalizing trade in environmental goods like solar panels. Yet climate change negotiations often take place in isolation from trade deals, leaving the two areas of policy largely unaffected by each other.

A trade policy that bans foreign energy imports is a potential gold mine for climate action because a ban obscures who is responsible for the cost of higher fuel prices. Voters have proven to be averse to any policies that directly increase the cost of carbon pollution, such as Washington State’s carbon tax ballot initiative failure in 2018. As Matto Mildenberger has shown, it has been very difficult to push through pro-climate policies because they fracture coalitions on both sides of the aisle, bringing together erstwhile enemies like unions and corporations. A ban on foreign energy, on the other hand, seems like an “America first” policy that privileges the domestic economy at the expense of foreigners—even though it will result in higher gas prices in both the short and long term.

In the short term, bans of energy imports lead to a surge in higher oil and gas prices as suppliers react to changes in the market. Over the long term, a ban on foreign energy will have the net effect of any tariff: it will permanently raise the domestic price of the good, in this case oil and gas. For the United States, both renewable energy and oil companies stand to benefit, though oil companies will reap the lion’s share of the gains as consumers pay more at the pump. We know that higher gas prices both decrease energy usage and push car buyers towards electric vehicles, ultimately reducing carbon consumption for decades.

By favoring domestic energy suppliers, the U.S. can act tough on authoritarian regimes like Russia, raise the price of gasoline to reduce carbon pollution, and secure the support of oil companies who will profit. In other words, we could trap oil companies like the monkey in Aesop’s fable, its hand around a nut inside a jar that it simply will not let go of.

We know from recent trade wars that it won’t be easy for businesses hurt by higher fuel prices to mobilize together to defeat energy bans. As part of my research with the Princeton Trade Study on President Trump’s trade war with China, we implemented an online survey experiment of U.S. businesspeople in which we randomly provided some managers with information about how the trade war had affected their industry. We found that conservative-leaning managers thought the trade war helped their firm—even if our data showed it had not–while liberals believed the opposite. The complexities of the impact of tariffs on supply chains meant that businesses found it difficult to know who to blame for rising costs and whether to take politically risky action to oppose the trade war.

Energy bans are of course only one part of larger climate reform. But the power of trade restrictions to reshape economies in ways that are politically expedient shows an important way forward for feasible and immediate climate action.