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Friday, October 16, 2009

Carbon Border Tariffs Put U.S. In Climate Conundrum

Originally posted at the Breakthrough Institute

The United States may be stuck in the middle of a climate conundrum. A proposal to establish border tariffs to account for the carbon associated with the imported manufactured products, like steel, looks critical to securing the support of key swing Senators interested in protecting the competitive position of American manufacturing. Without these key swing votes, including Ohio Senator Sherrod Brown and at least nine of his Democratic colleagues, a Senate climate bill has little hope of passing, which climate advocates argue would hamstring U.S. negotiators trying to forge an international climate agreement in Copenhagen this December.

Yet according to the New Scientist, those same tariff provisions that could win passage of a U.S. climate bill are firmly opposed by China and other developing nations and could both damage Sino-American trade relations and fissure international climate negotiations:

"Following lobbying by heavy industries, the US Congress is considering imposing tariffs on imports from China and other developing nations. That could be a deal-breaker for poor nations at December's climate change talks in Copenhagen.

If Congress passes laws imposing a limit on US greenhouse gas emissions, energy-intensive sectors such as steel-making and cement manufacture would almost certainly face increased costs. Competitors in China and other developing nations not subject to similar restrictions - and China has said that it will not set itself an emissions target - might be able to produce steel more cheaply, and take business away from US firms."

With critical Senate Democrats demanding border tariffs, there is no chance the bill will pass without their inclusion. Alternately, China, the world's largest emitter of greenhouse gases, and India will not be inclined to cooperate on an international agreement if they think the final legislation will include border tariffs.

The New Scientist reports that Jake Caldwell of the Center for American Progress believes these competing interests can yet be reconciled:

"Although China will not set itself emissions targets, it has said it will commit to reducing its carbon intensity - the amount of carbon emitted per unit of energy used or dollar of wealth created. If the goals are tough enough, Chinese industries would have to invest in cleaner technology, like their US counterparts. That might be enough to persuade the senators to soften their stance on tariffs."

While a strict Chinese carbon intensity reduction commitment that ensures investments in clean technology might be a more proactive stance against climate change than highly touted but typically symbolic emissions targets, it is a stretch to assert that such a commitment would relieve senators concerned about the state of U.S. steel makers and other manufacturers. If China commits to reducing carbon intensity, there is really no way to ensure that Chinese steel manufacturers would be subject to regulations equivalent to those imposed on U.S. steel manufacturers and thus comparable cost increases. China is just as likely to direct more of their major public investment funds toward cleaning up its steel production process, rather than imposing regulations on Chinese industry that could potentially narrow the gap between Chinese and U.S. steel prices.

The border tariff conundrum is indicative of the larger and apparently indomitable challenges facing climate strategies premised on regulating and pricing carbon, like those at the core of both the House and Senate climate bills. To satisfy the slough of interests aligned against increased energy prices, carbon pricing efforts are steadily eroded and compromised until they remain unable to secure the deep cuts in emissions they are designed to achieve. Perhaps instead of trying to cajole China into adopting emissions caps and carbon prices, the U.S. should adopt a healthy dose of China's investment-oriented strategy to improve industrial energy intensity and build a modern clean energy infrastructure. Until then, expect these impasses and climate conundrums to persist...

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