Don't Yank the Tariff Provisions from the House Climate Change Bill
President Obama deserves a share of the credit for the historic vote by the House June 26 to pass the first climate change bill. The bill is far from perfect, but it is an important step in the right direction. In comments following the House vote, however, President Obama took a step in the wrong direction. In urging the Senate to swiftly pass their counterpart to the House bill, President Obama raised questions about a provision that would impose a tariff on the import of goods from countries where the cost of such good benefits from weaker climate change laws:
"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….I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries."
Removing the tariff provision from the bill would give its opponents a strong argument for its defeat. Opponents argue that by imposing what they classify as an exorbitant energy tax on products such as steel, cement and chemicals the climate bill would simply force manufacturers to shift production to foreign countries with more favorable energy costs, resulting in no net reduction of greenhouse gas emissions AND loss of jobs in the US.
This is a potent argument which, if left unanswered, could doom the bill in the Senate. Although President Obama suggested that there may be better alternatives to the "protectionist" provision in the House bill he did not elaborate on them. One alternative that has received some favorable press is the so-called "sectoral approach" in which certain energy-intensive industries seek to reach agreement on a global standard for GHG emissions from facilities in the sector.
Although the sectoral approach is arguably sound in principle, the fear is that in practice the affected sectors would be able to push through weak standards which undermine the battle against global warming. It is almost like begging the fox to guard the henhouse. Another alternative would allow the United States to scrap its cap-and-trade system if China and India do not adopt similar programs. This avoids the fox/henhouse problem, but creates a bigger one: in effect, it cedes to foreign countries the decision of whether WE should combat climate change. The House approach avoids both problems, and should be followed in the Senate.
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