If you regulate CO2 produced from manufacturing, it's probably more expensive for you to produce goods compared to somebody who just blithely opens the smokestacks like they're living in 19th-century England. Carbon tariffs are a way for countries that do control CO2 to level the economic playing field against ones that don't—you simply tariff imported goods that are cheap because of polluting so that the price better reflects the damage done, and so that the cleaner country can compete.
Or, rather, it was assumed the parties would be countries—and it was generally assumed that China would be the first polluter to have a tariff levied against it. But, you know assumptions ...
The first carbon tax to reduce the greenhouse gases from imports comes not between two nations, but between two states. Minnesota has passed a measure to stop carbon at its border with North Dakota. To encourage the switch to clean renewable energy Minnesota plans to add a carbon fee of between $4 and $34 per ton of carbon dioxide emissions to the cost of coal-fired electricity, to begin in 2012, to discourage the use of coal power; the greatest source of greenhouse gas emissions. Coal has immediate health effects in addition to the well documented long term effects on climate. Coal has been implicated in asthma, diabetes, heart disease and even neurological damage, reducing intelligence levels. North Dakota ranks 8th in toxic metals contaminating its coal waste, with 3,419 tons of toxic metals.
If this seems a little weird, you should probably understand that Minnesota has been generally pushing for cleaner power within its borders (it's no California, but it's doing better on this than most states), but the utility companies that operate here have, over the past decades, sited a lot of coal power plants on the relatively cheap and open land of North Dakota. My guess would be that this is a way of extending policy to cover more of the energy used within the state, even though it happens to be produced elsewhere, while simultaneously spurring investment (theoretically in both Minnesota and North Dakota, as only coal-power electricity is affected) in renewable energy development.
North Dakota, meanwhile, is pissed, and has sued the state of Minnesota. Minnesota had anticipated this, and has a half million dollars set aside to fight.
Scientific American: First Carbon Tariff Will Tax CO2 at the Border
Treehugger: Minnesota Slaps North Dakota With World's First Carbon Tariff
Maggie Koerth-Baker is the science editor at BoingBoing.net. She writes a monthly column for The New York Times Magazine and is the author of Before the Lights Go Out, a book about electricity, infrastructure, and the future of energy. You can find Maggie on Twitter and Facebook.