carbon tariffs

Baucus wants border measures in climate bill

by Fran Smith on November 10, 2009

in Energy, Environment, Global Warming, International, Nanny State, Trade

Uh-oh.  Senator Max Baucus (D-Montana) is raising the stakes on a U.S. climate bill by endorsing the idea of some sort of tariff on goods from countries that haven’t taken steps to suppress fossil fuel use.  According to Reuters, Baucus, Chairman of the Senate Finance Committee, yesterday said:

“We must push our trading partners to do their part to curb harmful emissions and we must devise a border measure, consistent with our international obligations, to prevent the carbon leakage that would occur if US manufacturing shifts to countries without effective climate change programs.”

Currently the Senate Environment and Public Works Committee, chaired by Senator Barbara Boxer, has rushed through its own bill without minority input to try to catch up with the House, which passed its cap-and-trade bill – H.R. 2454 — on June 26, 2009. The House bill contains a border tax adjustment measure, while the Senate bill does not.  At least, yet.  But Baucus’ comments are a strong signal that the Senate bill will also include tariffs or border “adjustments,” i.e., taxes.

This unfortunate idea is gaining greater traction among global warming advocates as a way to maintain U.S. competitiveness for industries, such as steel and cement, that would be facing higher costs if an energy suppression bill to address global warming is passed.  Proponents of “border measures” also see this as a way to curtail so-called leakage of carbon-intensive industries and related jobs to other countries without similar constraints. Of course, the common justification for those who want to hobble their competition is the refrain: “Level the playing field.”  In Washington politics, that usually means bringing your competitors down to your level.  Check out this article for some possible consequences.

These endorsements could portend a carbon tariff push in Copenhagen when world climate pukkas gather on December 7, 2009. Luckily for people in the U.S., it’s not likely that a newly minted global warming bill will be in their pockets.

Climate Policy Imperils China, India

by Marlo Lewis on November 5, 2009 · 2 comments

in Global Warming

Jonathan Pershing, head of the U.S. delegation at the UN climate talks in Barcelona, says China should cut its CO2 emissions 50% by 2050.

Reuters reports:

BARCELONA, Spain, Nov 5 (Reuters) – China should roughly halve its greenhouse gas emissions by 2050 to keep the world on a safe climate path, the head of the U.S. delegation at U.N. climate talks in Barcelona said on Thursday.

Leading industrialised countries say that the world must halve greenhouse gases by 2050 to avoid the worst effects of climate change, and have committed to lead by cutting their own emissions by 80 percent.

China should cut by about 50 percent, leaving space for poorer countries to grow their economies, Jonathan Pershing told Reuters.

“If you put China in there at a 50 percent reduction, if we’re a bit higher, that gives lesser developed countries a bit lower. If they are in that middle band, plus or minus some percentage, that seems about right.”

China would be on course to meet that goal if it repeated its present energy efficiency five-year plan into the future, he added. “They’re doing pretty well,” he said.

As discussed in previous posts, meeting the EU/UN/Al Gore CO2 “stabilization” goal — 450 parts per million by 2050 — would require heroic (suicidal?) sacrifices on the part of developing countries. Stabilization at 450 ppm would require, at a minimum, a 50% reduction in global emissions by 2050. Because most of all the increase in global emissions over the next four decades (indeed, the next 90 years) is projected to come from developing countries, meeting the stabilization target would require developing countries to lower their emissions more than 60% below baseline projections even if industrial countries magically achieve zero net emissions by 2050!

Barring technological breakthroughs (in their nature unpredictable) that dramatically lower the cost and improve the performance of non-emitting energy technologies, the only way developing countries could comply is by restricting their use of energy. Yet developing countries are poor in no small part because they lack access to abundant, affordable energy. The 450 ppm goal is a recipe for “stabilizing” global poverty.

Don’t be fooled by Pershing’s remark that all China needs to do is keep repeating its “five-year” plan. Supposedly, China is already “well on the way” to reducing its energy intensity 20% by 2010. Based on the only data available, Roger Pielke, Jr. finds that China has cut intensity only 7.4% from 2005 to 2008, “meaning that it has a long way to go to reach a 20% target by 2010.” Besides, even if the first five-year emission intensity reduction plan succeeds, it represents the low-hanging fruit. Replicating that achievement every five years would become increasingly costly and difficult.

That a 450 ppm CO2 stabilization target cannot be met unless China slams the brakes on its economy has been clear from basic emissions arithmetic for some time. What’s new is that a U.S. Government official is quantifying, in the context of climate treaty negotiations, what “meaningful participation” by China actually means.

So far, India and China have escaped Kyoto-style energy rationing. This makes their products more competitive in global markets, and pulls capital and jobs away from CO2-regulated economies.  But we’re only two years into the first (2008-2012) Kyoto compliance period. At some point, free riders have to pay up or get off the train.

The EU, Japan, and the United States (if it ratifies Kyoto II) will not accept a permanent arrangement under which they bear all the costs of energy rationing, fork over billions in technology transfers and climate assistance to developing countries, and export more jobs to India and China.

The longer the Kyoto project endures, the greater the pressure India and China will face — in the form of carbon tariffs, for example — to join the club of the carbon-constrained.

If India and China want to protect their right to grow and avert an economically-debilitating era of trade conflict, they should get off the global warming bandwagon as soon as possible. A balanced assessment of the science does not justify alarm. India and China already act on the premise that global warming policy is more dangerous than global warming itself. It’s time for their words to match their deeds.

Leading trade lawyer: real problems with carbon tariffs

by Fran Smith on July 9, 2009 · 1 comment

in Agriculture, Energy, Environment, Global Warming, International, Legal, Trade

Leading trade lawyer Gary Horlick testified yesterday on carbon tariffs before the Senate Finance Committee.  As the Senate prepares an energy suppression/global warming bill, it is attempting to find ways to soften the “border adjustment” provisions in the House-passed bill (H.R. 2454).

Horlick points out some of the practical problems of setting up a carbon tariff system and cautions about the potential effects of such measures on the international trading system.  As he notes, if the production method rather than the end-product is focused on, such processes as agricultural biotechnology may face increased challenges in the World Trade Organization:

It is tempting to say that we can re-interpret existing WTO rules to permit whatever measures are necessary to protect our environment. But do we really want to change those existing rules? The key to the U.S. economy is constant innovation.

One of the important fields where we lead the world of innovation is biotechnology, which is revolutionizing medicine, agriculture, and even many of the environmental concerns dealt with in proposed legislation (such as environmental remediation and renewable fuels). So far the United States has resisted efforts in Europe and elsewhere to limit our market access for our products because of how they are produced – from biotech means. But if we re-interpret WTO rules to allow trade barriers based on how things are made, we open up a can of worms – and might permit other countries to block our biotech exports, including major items such as corn, soybeans, and other crops.

Talk about creating chaos in the world trading system!

Killing Bill

by Tatiana Kryzhanovskaya on July 7, 2009

in Environment, International, Trade

In today’s Washington Examiner, the U.S. Chamber of Commerce ran an ad where its President and CEO Thomas J. Donohue warns that the Waxman-Markey climate change bill “would put U.S. businesses at a disadvantage, would violate our international trade obligations and could incite a devastating trade war that would cripple American exporters.”

The cap-and-trade system–together with the carbon tariffs and border adjustments suggested in the bill–will be harmful for U.S. businesses, and as Donohue points out, “would not be a good idea in the midst of the worst recession since the Great Depression.”

As CEI Energy Policy Analyst William Yeatman and former CEI Warren Brookes Fellow Jeremy Lott highlighted, the Waxman-Markey bill contains 397 new regulations. The economic cost estimates are staggering, so the business community is understandably extremely concerned.

Mr. Donohue’s full statement can be found here.

India calls carbon tariffs protectionist

by Fran Smith on April 7, 2009 · 1 comment

in Energy, Environment, Global Warming, International

At the Bonn, Germany, UN meetings on global warming issues, India urged rich countries not to use “green” protectionism by imposing carbon tariffs on carbon-intensive products from poor countries.  India’s special envoy to the talks, Shyam Saran, was quoted as saying:

“That is simply not acceptable, that is protectionism.”

“We should be very careful that we don’t start going in that direction. We welcome any kind of arrangement … where there can be a sharing of experience or best practices for any of these energy-intensive sectors.”

Earlier, China’s top climate change official had warned about possible retaliation if carbon tariffs were assessed, as was suggested by the U.S. Secretary of Energy.  Sounds like this issue is shaping up as the rich against the poor, i.e., already industrialized and developed countries attempting to penalize those emerging economies dependent on energy use for their continued economic growth.

Cap-and-trade and carbon tariffs — the economic downside

by Fran Smith on March 30, 2009

in Economy, Energy, Environment, International, Trade

Today the lead editorial in the Wall Street Journal takes a hard look at some of the negative economic consequences of touted cap-and-trade programs to reduce CO2 emissions and the possibility of carbon tariffs to protect U.S. businesses.  Not only would such programs cost “heavy-industry” jobs already suffering in the global recession but also could lead to trade wars as developing countries retaliate:

So in addition to all the other economic harm, a cap-and-trade tax will make foreign companies more competitive while eroding market share for U.S. businesses. The most harm will accrue to the very U.S. manufacturing and heavy-industry jobs that Democrats and unions claim to want to keep inside the U.S. A cap-and-tax plan would be the greatest outsourcing boon in history. And it may even increase CO2 emissions overall, because the developing nations where businesses are likely to relocate — if they don’t simply close — tend to use energy less efficiently than does the U.S.

Meanwhile, carbon trade barriers would almost certainly violate U.S. obligations in the World Trade Organization. Since carbon energy cuts across so many industries, a tariff would presumably have to hit tens of thousands of products. Any restriction the U.S. imposes on imports can also just as easily be turned around and imposed on U.S. exports, whatever their carbon content.

See a post last Friday with questions from House Ranking Members on committees with oversight in these areas.

Policymakers’ letter asks tough questions re carbon tariffs

by Fran Smith on March 27, 2009

in Economy, Energy, Environment, Global Warming, International, Trade

Yesterday Ranking Members of both two House committees and two subcommittees wrote to the new U.S. Trade Representative Ron Kirk and asked him to clarify the Administration’s position on the issue of carbon tariffs.  The letter was sparked by recent remarks of Energy Secretary Steven Chu that the U.S. was considering levying tariffs against countries that haven’t taken steps to reduce carbon emissions.

In their letter Congressmen Joe Barton, Ralph Hall, Greg Walden, and Paul Brown cautioned:

Any emissions-related trade policy will be extremely complicated.  Careful consideration of the pros and cons — and legality — of any such policy is critical.  Poor decisions can lead to destructive trade wars that could put tens of thousands of U.S. workers out of a job, and severely harm our economy.

As Congress moves on proposals for mandated reductions in carbon emissions — such as a cap-and-trade scheme — the notion is gaining that “something has to be done,” such as carbon tariffs, so that the U.S. can compete with countries that haven’t committed to emission reductions.  The Republican lawmakers — all on committees that have some jurisdiction on global warming issues — presented a list of hard and focused questions to USTR Kirk on what the Administration is planning and whether some of the serious downside risks of border measures have been considered. (The congressmen are Ranking Members on the Committee on Energy and Commerce and its Subcommittee on Oversight and Investigations and the Committee on Science and Technology and its Subcommittee on Investigations and Oversight.)

The letter is a formal request, and the USTR is obligated to respond to the policymakers’ questions.  Maybe this will take some of the wind out of the carbon tariff sails, especially since climate negotiators from nearly 190 countries will be meeting in Bonn, Germany starting March 29 to come up with concrete plans for what they hope will be an agreement in December.

So, in the midst of a deep worldwide recession, countries will be planning to make energy less affordable, to force some major emitters out of business, and maybe start a trade war over border tariffs.  Don’t we already have enough economic problems to contend with?

(Hat-tip: Iain Murray)