Oil prices climbed sharply Friday after OPEC and other producers led by Russia agreed to cut output to reduce global inventories of crude oil.

OPEC countries and the Russian-led coalition agreed to collectively slash oil production by 1.2 million barrels a day, said OPEC president Suhail Mohamed al-Mazrouei, more than the 1 million barrel cut the market anticipated.

After two days of negotiations, Saudi Arabia and other OPEC countries said they would cut 800,000 barrels a day, while non-OPEC allies agreed to an additional 400,000 barrels per day.

The cuts, from which OPEC members Iran, Venezuela and Libya are exempt, will begin in January and remain in effect for six months.

The deal highlights Russia’s new-found influence on the global oil market and the significance of Russia’s alliance with Saudi Arabia, the de facto leader of OPEC.

Oil-producing nations have been under pressure to cut production to stabilize oil prices, which have dropped sharply over the past few months. Global oil prices have plummeted by more than 30 percent since early October.

The cuts were agreed to despite pressure from U.S. President Donald Trump to maintain current levels of oil production, which have surged since the end of 2017.

The surge is primarily due to the U.S., which has increased production by 2.5 million barrels a day since early 2016, making the U.S. the world’s largest producer. 

On Wednesday, Trump tweeted, “The World does not want to see, or need, higher oil prices!” 
…

Oil prices climbed sharply Friday after OPEC and other producers led by Russia agreed to cut output to reduce global inventories of crude oil.

OPEC countries and the Russian-led coalition agreed to collectively slash oil production by 1.2 million barrels a day, said OPEC president Suhail Mohamed al-Mazrouei, more than the 1 million barrel cut the market anticipated.

After two days of negotiations, Saudi Arabia and other OPEC countries said they would cut 800,000 barrels a day, while non-OPEC allies agreed to an additional 400,000 barrels per day.

The cuts, from which OPEC members Iran, Venezuela and Libya are exempt, will begin in January and remain in effect for six months.

The deal highlights Russia’s new-found influence on the global oil market and the significance of Russia’s alliance with Saudi Arabia, the de facto leader of OPEC.

Oil-producing nations have been under pressure to cut production to stabilize oil prices, which have dropped sharply over the past few months. Global oil prices have plummeted by more than 30 percent since early October.

The cuts were agreed to despite pressure from U.S. President Donald Trump to maintain current levels of oil production, which have surged since the end of 2017.

The surge is primarily due to the U.S., which has increased production by 2.5 million barrels a day since early 2016, making the U.S. the world’s largest producer. 

On Wednesday, Trump tweeted, “The World does not want to see, or need, higher oil prices!” 
…

 The U.S. International Trade Commission said on Friday it made a final determination that American producers were being harmed by imports of common alloy aluminum sheet products from China, a finding that locks in duties on the products.

The ITC determination means that duties ranging from 96.3 percent to 176.2 percent previously announced by the U.S. Commerce Department would be put in place for five years. The department said last month the products were being subsidized and dumped in the U.S. market.

The decision marked the first time that final duties were issued in a trade remedy case initiated by the U.S. government since 1985. Usually, trade cases are launched based on a complaint from a U.S. producer or group of producers.

The Trump administration has promised a more aggressive approach to trade enforcement by having the department launch more anti-dumping and anti-subsidy cases on behalf of private industry.

In 2017, imports of common alloy aluminum sheet from China were valued at an estimated $900 million. The flat-rolled product is used in transportation, building and construction, infrastructure, electrical and marine applications.

U.S. aluminum industry firms, including Aleris Corp , Arconic Inc and Constellium NV, testified in the case last year about what they termed a surge in “low-priced, unfairly traded imports.”
…

 The U.S. International Trade Commission said on Friday it made a final determination that American producers were being harmed by imports of common alloy aluminum sheet products from China, a finding that locks in duties on the products.

The ITC determination means that duties ranging from 96.3 percent to 176.2 percent previously announced by the U.S. Commerce Department would be put in place for five years. The department said last month the products were being subsidized and dumped in the U.S. market.

The decision marked the first time that final duties were issued in a trade remedy case initiated by the U.S. government since 1985. Usually, trade cases are launched based on a complaint from a U.S. producer or group of producers.

The Trump administration has promised a more aggressive approach to trade enforcement by having the department launch more anti-dumping and anti-subsidy cases on behalf of private industry.

In 2017, imports of common alloy aluminum sheet from China were valued at an estimated $900 million. The flat-rolled product is used in transportation, building and construction, infrastructure, electrical and marine applications.

U.S. aluminum industry firms, including Aleris Corp , Arconic Inc and Constellium NV, testified in the case last year about what they termed a surge in “low-priced, unfairly traded imports.”
…

U.S. stocks clawed most of their way back from a deep slide Thursday that at one point had wiped out the market’s gains for the year. 

An early plunge briefly knocked more than 700 points off the Dow Jones industrial average as the arrest of a senior Chinese technology executive threatened to cause another flare-up in tensions between Washington and Beijing. 

The sell-off eased by late afternoon, however, after The Wall Street Journal reported that the Federal Reserve is considering breaking with its current approach of steady interest rate hikes, favoring a wait-and-see approach. That was relief to investors worried that the Fed might raise interest rates too fast, which could choke off economic growth.  

No ‘rigid schedule’ of hikes

“The Fed is trying to, in essence, come out and make it clear they are not on a rigid schedule of rate hikes next year,” said Quincy Krosby, chief market strategist at Prudential Financial.  

The S&P 500 index fell 4.11 points, or 0.2 percent, to 2,695.95. The benchmark index had been down as much as 2.9 percent.  

The Dow dropped 79.40 points, or 0.3 percent, to 24,947.67. The average had briefly slumped as much as 784 points.  

The technology-heavy Nasdaq composite reversed an early loss to finish with a gain, adding 29.83 points, or 0.4 percent, to 7,188.26. 

The Russell 2000 index of small-company stocks gave up 3.34 points, or 0.2 percent, to 1,477.41. 

Traders continued to shovel money into bonds, a signal that they see weakness in the economy ahead. The yield on the 10-year Treasury note fell to 2.89 percent from 2.92 percent on Tuesday, a large move. 

U.S. stock and bond trading were closed Wednesday because of a national day of mourning for President George H.W. Bush.  

Losses in banks and energy and industrial stocks outweighed gains in internet and real estate companies.  

Citigroup fell 3.5 percent to $60.06. Halliburton slid 4.7 percent to $29.79. Discovery climbed 4.7 percent to $26.99. 

Last week, stocks jumped after Fed Chairman Jerome Powell indicated the central bank might consider a pause in rate hikes next year while it gauges the impact of its credit tightening program.  

Fed meeting ahead

The Fed has raised rates three times this year and is expected to boost rates for a fourth time at its Dec. 18-19 meeting of policymakers. That steady pace of rate hikes has begun to worry some investors amid growing signs that some sectors of the economy are hurting, including the U.S. housing market. At the same time, there has been growing evidence that global economic growth is slowing. 

“The market seems right now to be focused on increased risks for a 2020 recession,” said Patrick Schaffer, Global Investment Specialist, J.P. Morgan Private Bank. “It’s a very hard market to buy when you see really strong signals that we are indeed late [in the economic] cycle.” ​

Thursday’s initial wave of selling in the market came about as traders reacted to the news that Canadian authorities arrested the chief financial officer of China’s Huawei Technologies on Wednesday for possible extradition to the U.S. The Globe and Mail newspaper, citing law enforcement sources, said Meng Wanzhou is suspected of trying to evade U.S. trade curbs on Iran. 

Meng is a prominent member of Chinese society as deputy chairman of the board and the daughter of company founder Ren Zhengfei. China demanded Meng’s immediate release. 

The arrest came less than a week after President Donald Trump met with Chinese President Xi Jinping at the G-20 summit in Argentina. 

Markets rallied on Monday on news that Trump and Xi agreed to a 90-day stand-down in their trade dispute. That optimism quickly faded as skepticism grew that Beijing will yield to U.S. demands anytime soon, leading to a steep sell-off in global markets on Tuesday. 

Positive remarks from Beijing

On Thursday, China’s government said it would promptly carry out the tariff cease-fire with Washington. It also expressed confidence that the two nations can reach a trade agreement. The remarks suggest Beijing wants to avoid disruptions from Meng’s arrest.  

Even so, investors remained skeptical.  

“Trade tensions aren’t going away,” Schaffer said. “Contradictory statements from the administration have given some people a little bit of pause with respect to the optimism that people felt following the Argentina G-20 conference.” 

The renewed jitters over the implications that Meng’s arrest could have on U.S.-China trade negotiations weighed on overseas markets. 

In Europe, the DAX in Germany dropped 3.5 percent, while France’s CAC 40 lost 3.3 percent. The FTSE 100 in Britain declined 3.1 percent, its biggest drop since the country held a vote to leave the European Union in June 2016.  

The news also resulted in another down day for markets in Asia. 

Hong Kong’s Hang Seng index tumbled 2.5 percent and Japan’s benchmark Nikkei 225 fell 1.9 percent. Australia’s S&P/ASX 200 lost 0.2 percent, while South Korea’s Kospi sank 1.6 percent. Shares also fell in Taiwan and all other regional markets. 

Oil prices fell sharply as traders appeared to doubt that an expected production cut by OPEC will be enough to boost the price of crude. Benchmark U.S. crude dropped 2.6 percent to settle at $51.49 a barrel in New York. Brent crude, used to price international oils, slid 2.4 percent to close at $60.06 per barrel. 
…

U.S. stocks clawed most of their way back from a deep slide Thursday that at one point had wiped out the market’s gains for the year. 

An early plunge briefly knocked more than 700 points off the Dow Jones industrial average as the arrest of a senior Chinese technology executive threatened to cause another flare-up in tensions between Washington and Beijing. 

The sell-off eased by late afternoon, however, after The Wall Street Journal reported that the Federal Reserve is considering breaking with its current approach of steady interest rate hikes, favoring a wait-and-see approach. That was relief to investors worried that the Fed might raise interest rates too fast, which could choke off economic growth.  

No ‘rigid schedule’ of hikes

“The Fed is trying to, in essence, come out and make it clear they are not on a rigid schedule of rate hikes next year,” said Quincy Krosby, chief market strategist at Prudential Financial.  

The S&P 500 index fell 4.11 points, or 0.2 percent, to 2,695.95. The benchmark index had been down as much as 2.9 percent.  

The Dow dropped 79.40 points, or 0.3 percent, to 24,947.67. The average had briefly slumped as much as 784 points.  

The technology-heavy Nasdaq composite reversed an early loss to finish with a gain, adding 29.83 points, or 0.4 percent, to 7,188.26. 

The Russell 2000 index of small-company stocks gave up 3.34 points, or 0.2 percent, to 1,477.41. 

Traders continued to shovel money into bonds, a signal that they see weakness in the economy ahead. The yield on the 10-year Treasury note fell to 2.89 percent from 2.92 percent on Tuesday, a large move. 

U.S. stock and bond trading were closed Wednesday because of a national day of mourning for President George H.W. Bush.  

Losses in banks and energy and industrial stocks outweighed gains in internet and real estate companies.  

Citigroup fell 3.5 percent to $60.06. Halliburton slid 4.7 percent to $29.79. Discovery climbed 4.7 percent to $26.99. 

Last week, stocks jumped after Fed Chairman Jerome Powell indicated the central bank might consider a pause in rate hikes next year while it gauges the impact of its credit tightening program.  

Fed meeting ahead

The Fed has raised rates three times this year and is expected to boost rates for a fourth time at its Dec. 18-19 meeting of policymakers. That steady pace of rate hikes has begun to worry some investors amid growing signs that some sectors of the economy are hurting, including the U.S. housing market. At the same time, there has been growing evidence that global economic growth is slowing. 

“The market seems right now to be focused on increased risks for a 2020 recession,” said Patrick Schaffer, Global Investment Specialist, J.P. Morgan Private Bank. “It’s a very hard market to buy when you see really strong signals that we are indeed late [in the economic] cycle.” ​

Thursday’s initial wave of selling in the market came about as traders reacted to the news that Canadian authorities arrested the chief financial officer of China’s Huawei Technologies on Wednesday for possible extradition to the U.S. The Globe and Mail newspaper, citing law enforcement sources, said Meng Wanzhou is suspected of trying to evade U.S. trade curbs on Iran. 

Meng is a prominent member of Chinese society as deputy chairman of the board and the daughter of company founder Ren Zhengfei. China demanded Meng’s immediate release. 

The arrest came less than a week after President Donald Trump met with Chinese President Xi Jinping at the G-20 summit in Argentina. 

Markets rallied on Monday on news that Trump and Xi agreed to a 90-day stand-down in their trade dispute. That optimism quickly faded as skepticism grew that Beijing will yield to U.S. demands anytime soon, leading to a steep sell-off in global markets on Tuesday. 

Positive remarks from Beijing

On Thursday, China’s government said it would promptly carry out the tariff cease-fire with Washington. It also expressed confidence that the two nations can reach a trade agreement. The remarks suggest Beijing wants to avoid disruptions from Meng’s arrest.  

Even so, investors remained skeptical.  

“Trade tensions aren’t going away,” Schaffer said. “Contradictory statements from the administration have given some people a little bit of pause with respect to the optimism that people felt following the Argentina G-20 conference.” 

The renewed jitters over the implications that Meng’s arrest could have on U.S.-China trade negotiations weighed on overseas markets. 

In Europe, the DAX in Germany dropped 3.5 percent, while France’s CAC 40 lost 3.3 percent. The FTSE 100 in Britain declined 3.1 percent, its biggest drop since the country held a vote to leave the European Union in June 2016.  

The news also resulted in another down day for markets in Asia. 

Hong Kong’s Hang Seng index tumbled 2.5 percent and Japan’s benchmark Nikkei 225 fell 1.9 percent. Australia’s S&P/ASX 200 lost 0.2 percent, while South Korea’s Kospi sank 1.6 percent. Shares also fell in Taiwan and all other regional markets. 

Oil prices fell sharply as traders appeared to doubt that an expected production cut by OPEC will be enough to boost the price of crude. Benchmark U.S. crude dropped 2.6 percent to settle at $51.49 a barrel in New York. Brent crude, used to price international oils, slid 2.4 percent to close at $60.06 per barrel. 
…

The US trade deficit hit a 10-year high in October as Americans used a stronger dollar to snap up record imports, the government reported Thursday.

The result showed the trade gap has continued to swell despite the punitive tariffs imposed this year on allies and adversaries alike by US President Donald Trump, who has focused intently on the subject with the goal of reducing the deficit.

Amid Trump’s high-stakes trade war with Beijing, the total trade gap rose 1.7 percent to $55.5 billion, driven by all-time high imports, according to the Commerce Department.

The gap in goods trade with China likewise continued to expand, rising two percent to $38 billion, seasonally adjusted, as key exports like soybeans fell.

The October figure handily overshot analyst expectations, and could confirm weaker economic growth in the final quarter of 2018.

Americans bought more medications and imported autos while also taking more vacations, benefiting from the stronger US currency.

Travel by Americans also rose by $200 million, driving up US services imports to a record $46.9 billion.

The deficit in goods also was the highest on record at more than $78 billion, as US imports of goods and services hit a high as well, rising 1.5 percent to $266.5 billion.

Auto imports — another subject on which Trump is battling European leaders — likewise hit their highest level ever, at $31.8 billion.

From January to October, the total trade deficit rose more than 11 percent compared to the same period last year, and the gap in September was $555 million bigger than initially reported.

Long-suffering soy exports, victim of China’s retaliatory tariffs since July, fell by another $800 million in October while exports of aircraft and parts, also sensitive to trade relations, fell $600 million.

Meanwhile, there were declines in imports of computers and telecommunications equipment but not enough to offset the strong gains in pharmaceutical and auto imports for the month.
…

OPEC countries were gathered Thursday to find a way to support the falling price of oil, with analysts predicting the cartel and key ally Russia would agree to cut production by at least 1 million barrels per day.

Crude prices have been falling since October because major producers — including the U.S. — are pumping oil at high rates and due to fears that weaker economic growth could dampen energy demand. The price of oil fell 22 percent in November and was down again on Thursday amid speculation that OPEC’s action might be too timid to support the market.

Saudi Arabia, the heavyweight within OPEC, said Thursday it was in favor of a cut.

“I think a million (barrels a day) will be adequate personally,” Saudi oil minister Khalid Al-Falih said upon arriving to the meeting in Vienna. That, he said, would include production for both OPEC countries as well as non-OPEC countries, like Russia, which have in recent years been coordinating their production limits with the cartel.

That view was echoed by others, including the oil ministers of Nigeria and Iraq.

“I am optimistic that the agreement will stabilize the market, will stop the slide in the price (of oil),” said Iraq’s Thamir Ghadhban.

Investors did not seem convinced, however, and were pushing the price of oil down sharply again on Thursday, with some experts saying there is concern about the size of the cut. The international benchmark for crude, Brent, was down $1.52 at $60.04 a barrel.

“The cartel has to go above and beyond the 1 million barrels cut, to at least 1.4 million to really steady the ship,” said Neil Wilson, chief market analyst at Markets.com.

The fall in the price of oil will be a help to many consumers as well as energy-hungry businesses, particularly at a time when global growth is slowing. And U.S. President Donald Trump has been putting pressure publicly on OPEC to not cut production. He tweeted Wednesday that “Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!”

While Saudi Arabia has indicated it is willing to cut production, its decision may be complicated by Trump’s decision to not sanction the country over the killing of dissident journalist Jamal Khashoggi. U.S. Senators say, after a briefing with intelligence services, that they are convinced that Saudi’s de-facto ruler, Crown Prince Mohammed bin Salman , was involved in Khashoggi’s death. Some experts say that gives the U.S. some leverage over the Saudis, though Al-Falih denied that on Thursday.

When asked if the Saudis had permission from Trump to cut production, Al-Falih replied: “I don’t need permission from any foreign governments.”

Experts say this week’s meeting of the Organization of the Petroleum Exporting Countries will influence the price of oil over the coming months. How strongly it does so could depend on Russia’s contribution, which will be determined in a meeting on Friday.

Analysts estimate that if Russia is willing to step up its production cuts, OPEC and non-OPEC countries could trim production by a combined 1.3-1.4 million barrels a day. A cut of 1 million barrels would be the minimum to support the market, and anything less could see the price of oil fall another $10 a barrel, according to Wilson.

“The stakes are high now for OPEC,” he said.

OPEC’s reliance on non-members like Russia highlights the cartel’s waning influence in oil markets, which it had dominated for decades. The OPEC-Russia alliance was made necessary in 2016 to compete with the United States’ vastly increased production of oil in recent years. By some estimates, the U.S. this year became the world’s top crude producer.

OPEC is also riven by internal conflict, especially between regional rivals Saudi Arabia and Iran. One of the key questions in Thursday’s talks is whether to exempt Iran from having to cut production, as its energy industry is already hobbled by U.S. sanctions on its crude exports.

Meanwhile, Qatar, a Saudi rival and Iranian ally, said this week it would leave OPEC in January. While it said it was purely a practical decision because it mainly produces natural gas and little oil, the move was viewed as a symbolic snub to the Saudi-dominated organization.
…

OPEC countries were gathered Thursday to find a way to support the falling price of oil, with analysts predicting the cartel and key ally Russia would agree to cut production by at least 1 million barrels per day.

Crude prices have been falling since October because major producers — including the U.S. — are pumping oil at high rates and due to fears that weaker economic growth could dampen energy demand. The price of oil fell 22 percent in November and was down again on Thursday amid speculation that OPEC’s action might be too timid to support the market.

Saudi Arabia, the heavyweight within OPEC, said Thursday it was in favor of a cut.

“I think a million (barrels a day) will be adequate personally,” Saudi oil minister Khalid Al-Falih said upon arriving to the meeting in Vienna. That, he said, would include production for both OPEC countries as well as non-OPEC countries, like Russia, which have in recent years been coordinating their production limits with the cartel.

That view was echoed by others, including the oil ministers of Nigeria and Iraq.

“I am optimistic that the agreement will stabilize the market, will stop the slide in the price (of oil),” said Iraq’s Thamir Ghadhban.

Investors did not seem convinced, however, and were pushing the price of oil down sharply again on Thursday, with some experts saying there is concern about the size of the cut. The international benchmark for crude, Brent, was down $1.52 at $60.04 a barrel.

“The cartel has to go above and beyond the 1 million barrels cut, to at least 1.4 million to really steady the ship,” said Neil Wilson, chief market analyst at Markets.com.

The fall in the price of oil will be a help to many consumers as well as energy-hungry businesses, particularly at a time when global growth is slowing. And U.S. President Donald Trump has been putting pressure publicly on OPEC to not cut production. He tweeted Wednesday that “Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!”

While Saudi Arabia has indicated it is willing to cut production, its decision may be complicated by Trump’s decision to not sanction the country over the killing of dissident journalist Jamal Khashoggi. U.S. Senators say, after a briefing with intelligence services, that they are convinced that Saudi’s de-facto ruler, Crown Prince Mohammed bin Salman , was involved in Khashoggi’s death. Some experts say that gives the U.S. some leverage over the Saudis, though Al-Falih denied that on Thursday.

When asked if the Saudis had permission from Trump to cut production, Al-Falih replied: “I don’t need permission from any foreign governments.”

Experts say this week’s meeting of the Organization of the Petroleum Exporting Countries will influence the price of oil over the coming months. How strongly it does so could depend on Russia’s contribution, which will be determined in a meeting on Friday.

Analysts estimate that if Russia is willing to step up its production cuts, OPEC and non-OPEC countries could trim production by a combined 1.3-1.4 million barrels a day. A cut of 1 million barrels would be the minimum to support the market, and anything less could see the price of oil fall another $10 a barrel, according to Wilson.

“The stakes are high now for OPEC,” he said.

OPEC’s reliance on non-members like Russia highlights the cartel’s waning influence in oil markets, which it had dominated for decades. The OPEC-Russia alliance was made necessary in 2016 to compete with the United States’ vastly increased production of oil in recent years. By some estimates, the U.S. this year became the world’s top crude producer.

OPEC is also riven by internal conflict, especially between regional rivals Saudi Arabia and Iran. One of the key questions in Thursday’s talks is whether to exempt Iran from having to cut production, as its energy industry is already hobbled by U.S. sanctions on its crude exports.

Meanwhile, Qatar, a Saudi rival and Iranian ally, said this week it would leave OPEC in January. While it said it was purely a practical decision because it mainly produces natural gas and little oil, the move was viewed as a symbolic snub to the Saudi-dominated organization.
…

The “yellow vests” in France are worrying greens around the world.

The worst riots in Paris in decades were sparked by higher fuel taxes, and French President Emmanuel Macron responded by scrapping them Wednesday. But taxes on fossil fuels are just what international climate negotiators, meeting in Poland this week, say are desperately needed to help wean the world off of fossil fuels and slow climate change.

“The events of the last few days in Paris have made me regard the challenges as even greater than I thought earlier,” said Stanford University environmental economist Lawrence Goulder, author of the book “Confronting the Climate Challenge.”

Economists, policymakers and politicians have long said the best way to fight climate change is to put a higher price on the fuels that are causing it — gasoline, diesel, coal and natural gas. Taxing fuels and electricity could help pay for the damage they cause, encourage people to use less, and make it easier for cleaner alternatives and fuel-saving technologies to compete.

These so-called carbon taxes are expected to be a major part of pushing the world to reduce carbon dioxide emissions and try to prevent runaway climate change that economists say would be far more expensive over the long term than paying more for energy in the short term.

But it’s not so easy for people to think about long-term, global problems when they are struggling to get by.

Macron said the higher tax was his way of trying to prevent the end of the world. But the yellow vest protesters turned that around with the slogan: “it’s hard to talk about the end of the world while we are talking about the end of the month.”

The resistance to the fuel tax is a personal blow to Macron, who sees himself as the guarantor of the 2015 Paris climate accord, its strongest defender on the global stage. He has positioned himself as the anti-Trump when it comes to climate issues.

The French government quietly fears a Trump-led backlash against the accord could spread to other major economies whose commitment is essential to keeping the deal together.

The fuel tax was not originally Macron’s idea; it dates back to previous administrations. But he vigorously defended it and won the presidency in part on a promise to fight climate change.

So what went wrong?

Yale University economist William Nordhaus, who won this year’s Nobel prize for economics, said the tax was poorly designed and was delivered by the wrong person. “If you want to make energy taxes unpopular, step one is to be an unpopular leader,” he said. “Step two is to use gasoline taxes and call them carbon taxes. This is hard enough without adding poor design.”

Macron, like French presidents before him, made environmental and energy decisions without explaining to the public how important they are and how their lives will change. He’s also seen as the “president of the rich” — his first fiscal decision as president was scrapping a wealth tax. So hiking taxes on gasoline and diesel was seen as especially unfair to the working classes in the provinces who need cars to get to work and whose incomes have stagnated for years.

The French government already has programs in place to subsidize drivers who trade in older, dirtier cars for cleaner ones, and expanded them in an attempt to head off the protests last month. But for many French, it was too little, too late.

The French reaction to higher fuel prices is hardly unique, which highlights just how hard it can be to discourage fossil fuel consumption by making people pay more. In September, protests in India over high gasoline prices shut down schools and government offices. Protests erupted in Mexico in 2017 after government deregulation caused a spike in gasoline prices, and in Indonesia in 2013 when the government reduced fuel subsidies and prices rose.

In the United States, Washington state voters handily defeated a carbon tax in November.

“Higher taxes on fuel have always been a policy more popular among economists than among voters,” said Greg Mankiw, a Harvard economist and former adviser to President George W. Bush.

Even proponents of carbon taxes acknowledge that they can disproportionally hurt low-income people. Energy costs make up a larger portion of their overall expenses, so a fuel price increase eats up more of their paycheck and leaves them with less to spend. And because energy costs are almost impossible to avoid, they feel trapped.

It is also not lost on them that it is the rich, unbothered by fuel taxes, who are hardest on the environment because they travel and consume more.

“The mistake of the Macron government was not to marry the increase in fuel taxes with other sufficiently compelling initiatives promising to enhance the welfare and incomes of the ‘yellow vests,’ said Barry Eichengreen, an economist at the University of California, Berkeley.

Now the question is “How can we address the climate problem while also avoiding producing political upheaval,” Goulder said.

The key is giving a good chunk of money back to the people, Wesleyan University environmental economist Gary Yohe said.

Many economists back proposals that would tax carbon, but then use that money to offer tax rebates or credits that would benefit lower-income families.

The protests, while sparked by fuel prices, are also about income inequality, populism and anti-elitism, experts say, not just about carbon taxes.

“Is it a death knell for the carbon tax or pricing carbon? I don’t think so,” economist Yohe said. “It is just a call for being a little bit more careful about how you design the damn thing.”
…

The “yellow vests” in France are worrying greens around the world.

The worst riots in Paris in decades were sparked by higher fuel taxes, and French President Emmanuel Macron responded by scrapping them Wednesday. But taxes on fossil fuels are just what international climate negotiators, meeting in Poland this week, say are desperately needed to help wean the world off of fossil fuels and slow climate change.

“The events of the last few days in Paris have made me regard the challenges as even greater than I thought earlier,” said Stanford University environmental economist Lawrence Goulder, author of the book “Confronting the Climate Challenge.”

Economists, policymakers and politicians have long said the best way to fight climate change is to put a higher price on the fuels that are causing it — gasoline, diesel, coal and natural gas. Taxing fuels and electricity could help pay for the damage they cause, encourage people to use less, and make it easier for cleaner alternatives and fuel-saving technologies to compete.

These so-called carbon taxes are expected to be a major part of pushing the world to reduce carbon dioxide emissions and try to prevent runaway climate change that economists say would be far more expensive over the long term than paying more for energy in the short term.

But it’s not so easy for people to think about long-term, global problems when they are struggling to get by.

Macron said the higher tax was his way of trying to prevent the end of the world. But the yellow vest protesters turned that around with the slogan: “it’s hard to talk about the end of the world while we are talking about the end of the month.”

The resistance to the fuel tax is a personal blow to Macron, who sees himself as the guarantor of the 2015 Paris climate accord, its strongest defender on the global stage. He has positioned himself as the anti-Trump when it comes to climate issues.

The French government quietly fears a Trump-led backlash against the accord could spread to other major economies whose commitment is essential to keeping the deal together.

The fuel tax was not originally Macron’s idea; it dates back to previous administrations. But he vigorously defended it and won the presidency in part on a promise to fight climate change.

So what went wrong?

Yale University economist William Nordhaus, who won this year’s Nobel prize for economics, said the tax was poorly designed and was delivered by the wrong person. “If you want to make energy taxes unpopular, step one is to be an unpopular leader,” he said. “Step two is to use gasoline taxes and call them carbon taxes. This is hard enough without adding poor design.”

Macron, like French presidents before him, made environmental and energy decisions without explaining to the public how important they are and how their lives will change. He’s also seen as the “president of the rich” — his first fiscal decision as president was scrapping a wealth tax. So hiking taxes on gasoline and diesel was seen as especially unfair to the working classes in the provinces who need cars to get to work and whose incomes have stagnated for years.

The French government already has programs in place to subsidize drivers who trade in older, dirtier cars for cleaner ones, and expanded them in an attempt to head off the protests last month. But for many French, it was too little, too late.

The French reaction to higher fuel prices is hardly unique, which highlights just how hard it can be to discourage fossil fuel consumption by making people pay more. In September, protests in India over high gasoline prices shut down schools and government offices. Protests erupted in Mexico in 2017 after government deregulation caused a spike in gasoline prices, and in Indonesia in 2013 when the government reduced fuel subsidies and prices rose.

In the United States, Washington state voters handily defeated a carbon tax in November.

“Higher taxes on fuel have always been a policy more popular among economists than among voters,” said Greg Mankiw, a Harvard economist and former adviser to President George W. Bush.

Even proponents of carbon taxes acknowledge that they can disproportionally hurt low-income people. Energy costs make up a larger portion of their overall expenses, so a fuel price increase eats up more of their paycheck and leaves them with less to spend. And because energy costs are almost impossible to avoid, they feel trapped.

It is also not lost on them that it is the rich, unbothered by fuel taxes, who are hardest on the environment because they travel and consume more.

“The mistake of the Macron government was not to marry the increase in fuel taxes with other sufficiently compelling initiatives promising to enhance the welfare and incomes of the ‘yellow vests,’ said Barry Eichengreen, an economist at the University of California, Berkeley.

Now the question is “How can we address the climate problem while also avoiding producing political upheaval,” Goulder said.

The key is giving a good chunk of money back to the people, Wesleyan University environmental economist Gary Yohe said.

Many economists back proposals that would tax carbon, but then use that money to offer tax rebates or credits that would benefit lower-income families.

The protests, while sparked by fuel prices, are also about income inequality, populism and anti-elitism, experts say, not just about carbon taxes.

“Is it a death knell for the carbon tax or pricing carbon? I don’t think so,” economist Yohe said. “It is just a call for being a little bit more careful about how you design the damn thing.”
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