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Trade Concerns Raised in U.S. Climate Debate
Ben Block, 12 Mar 09

Ohio Senator Sherrod Brown and U.S. legislative leaders are discussing the inclusion of tariffs in the country's climate change policy, the Democratic Congressman said yesterday.

Although sparse on details, Brown said he and California Senator Barbara Boxer, Chair of the Senate Committee on Environment and Public Works, have spoken about trade provisions he described as "border equalization" measures.

"If a U.S. company, say a steel mill in Ohio, if their cost goes up dramatically for cutting carbon, it's one more reason to think they're not going to be competitive.... They lose jobs. [The state] loses manufacturing," Brown said during an event on green jobs hosted by the Worldwatch Institute and Heinrich Böll Foundation. "We need some guarantee that my state will not be overwhelmed by the costs [of a climate change bill]."

Brown is among a group of Democratic senators from industrial states whose coveted votes on climate legislation may
be lost
due to worries that the policy would cast undue economic hardship on their states.

Brown also raised concern about President Barack Obama's plan to return two-thirds of the profits from emissions credits to taxpayers, which the president has said would help offset the cost of higher energy bills. Such a policy may benefit states that are less reliant on fossil fuel energy sources, but not more-dependent regions, he said. Ohio burns coal for 86 percent of its electricity, according to the U.S. Energy Information Agency.

"The benefit is directed to everyone nationally in a middle-class tax cut. It doesn't strike me as fair," he said. "Those who bear the burden need to get benefits back."

Brown has called for assistance to the working class throughout his Senate term, but the issue has taken on greater urgency with the economic recession. Brown carried his concerns into the climate debate last year when he and a group of 10 senators from coal and automotive industry states opposed U.S. climate legislation. Five senators have since joined the group, after a letter outlining the senators' main concerns was delivered to Senator Boxer and Senate Majority Leader Harry Reid in June.

"The final bill must include enhanced safeguards to ensure a truly equitable and effective global effort that minimizes harm to the U.S. economy and protects American jobs," the letter said [PDF]. "If this mechanism [to protect manufacturing jobs] does not work, or is found to be noncompliant with the World Trade Organization, then the program needs to be modified or suspended."

Companies that represent the steel and utility industries have lobbied for tariffs on goods imported from countries that have less-stringent carbon restrictions - a policy often referred to as a "border adjustment charge" [PDF]. The U.S. Steel Corp. predicts that the United States may lose as many as 1 million jobs in the steel sector to countries such as China and Mexico.

Protectionist measures would likely draw the ire of U.S. trading partners and possibly violate World Trade Organization (WTO) agreements, according to Jake Colvin, vice president for global trade issues with the National Foreign Trade Council, a U.S. trade advocacy group.

Yet climate policy may be written in such a way that would circumvent current WTO rules, Colvin suggested during a speech [PDF] to the Global Business Dialogue in January. "International law in this area is relatively unformed, which suggests that there is an advantage to acting sooner rather than later," he said. "The first [climate legislation] proposals are more likely to become the foundation on which WTO rules will be based in the future."

In Europe, critics have voiced economic concerns similar to Brown's. But the combination of a regional cap-and-trade agreement and incentives for renewable energy industries have led to employment increases in Germany, said Rainer Hinrichs-Rahlwes, vice president of the European Renewable Energy Federation.

Renewable energy produced about 16 percent of Germany's electricity and 260,000 jobs last year, according to Hinrichs-Rahlwes. "Wind is the second largest buyer of steel products," he said during the event yesterday. "It's helped our steel industry remain competitive."

Despite Brown's criticism of proposed climate policies, he noted that climate change is "the great moral issue of our times." He also said that he supports an increase in technology transfer to China.

"We should share as much technology [with China] as we can so their coal-fired plants can be as clean as they can," he said.


Ben Block is a staff writer with the Worldwatch Institute. He can be reached at bblock@worldwatch.org.

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Comments

In a way it really seems obvious that we need this kind of mechanisms to get going with real CO2 taxation/cap and trade mechanisms - you can't expect the whole world to sign on to these things at the same time and you can't really establish them, if the most polluting industries are either exempt or move to other countries. In the end this seems to important that it would even warrant changing the WTO rules.

I was really happy to read this article because i always wondered why I didn't hear anyone discussing this.

As for Europe as an counter-example: our cap-and trade system has many exceptions and strange mechanisms to help our most polluting industries (e.g. coal power plants get their CO2 emission certificates for free - although they can sell them) that I wouldn't see it as such a positive example.


Posted by: Valentin on 21 Mar 09

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