While lauding the passing of the Waxman-Markey climate bill in the House of Representatives as an “extraordinary” step, President Obama has declared his opposition to trade sanctions included at the last minute.
The Clean Energy and Security Act would see greenhouse emissions cut to 17 per cent below 2005 levels by 2020 and by 83 per cent by 2050. An emissions cap and trade scheme among heavy emitters would be the cornerstone of the economic response to meet those targets. For the bill to become law, it must yet pass the Senate where it’s in for a tougher time and the likelihood of further amendment.
In order to secure the last remaining votes required to secure a House majority for the bill, its proponents inserted a provision that would force the president to levy “carbon tariffs” from 2020 on imports from countries that do not have their own emission reduction curbs in place. Congress rather than the President would largely dictate terms on the tariffs.
The eleventh-hour amendment to the bill enabled successful passage through the House but has again raised the specter of national emissions reduction laws opening up a new front in already problematic international trade rules.
A carbon tariff is a levy on imported emissions-intensive goods, such as aluminium, steel, cement and some chemical products, that compete with locally manufactured produce. Such “border adjustments” are designed to protect the competitiveness of local industries whose goods have higher prices than their imported rivals because they reflect the cost of carbon.
“I think there may be other ways of doing it than with a tariff approach,” Obama said following the vote. "I am very mindful of wanting to make sure that there's a level playing field internationally," he said.
Democrats in the manufacturing heartland states such as Michigan were only swayed into supporting the bill at the inclusion of the tariff provision. As it stands, the Bill still only narrowly passed the House by a vote of 219 to 212, with 44 Democrats voting to reject it.
The threat of carbon tariffs being imposed by industrialised countries has China, India and other developing world export-oriented nations crying foul. It only adds another problem area to the current stand-off in international negotiations over both a new global climate treaty and a new world trade agreement.
At the heart of the obstacles that have seen UN climate negotiations stalemated for three years or more is disagreement between developed and developing nations over who should face emission reduction obligations up to 2020 and how they should be shared between them.
While a US carbon tariff would not take effect until 2020, the intention would almost certainly add a further obstacle to current talks over the 2013-2020 period. Already, it's drawn a hardline response from India's environment minister, Jairam Ramesh, who slammed the tariff idea was "pernicious". At the same time, he reinforced the country's long-held stance rejecting any emission reduction obligations for the fast-developing nation.
Obama said he hoped the provision would be dropped from the US bill. “At a time when the economy worldwide is still deep in recession and we’ve seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there.”
Carbon tariffs are being supported in some areas of industry and politics in rich nations because developing nations appear adamant they won’t yet take on reduction targets. The European Union is holding onto the option of levying carbon tariffs depending on the outcome of climate negotiations, scheduled to be thrashed out at the end of 2009 in Copenhagen.
New York Times 28/6/09, Washington Post 29/6/09, Financial Times 30/6/09
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