Why the Tariff Provisions in the American Clean Energy & Security Act (ACESA) Will Survive
I previously wrote that the Obama Administration should back off its opposition to language in Waxman-Markey that imposes a tariff on imports from countries that do not require equivalent levels of GHG emissions reductions. This tariff provision is the only effective way to discourage US businesses from moving production overseas to countries with less stringent climate change laws, thereby defeating the goals of cap-and-trade by emitting over there what they cannot emit here. Opponents to the tariff provision claim that the bill's generous allocation of free emission allowances compensates firms for this disparity and thereby levels the playing field so that competitors in foreign countries lacking carbon emission controls do not enjoy a competitive advantage over carbon-capped US businesses.
That explanation, however, doesn't really wash. A large percentage of the allocations are to be doled out to electricity distributors that cannot move operations offshore and do not face foreign competition here. This allocation to the electricity wholesalers has nothing to do with leveling the playing field with competitors in foreign countries that do not control GHG emissions. It has to do with easing transition to a carbon constrained economy, deferring the impact so that industry can survive the move to a low-carbon economy.
Apparently, 10 Senate Democrats agree -- they have sent President Obama a letter stating that a "longer-term border adjustment mechanism is a vital part of this package to prevent the relocation of carbon emissions and industries" to countries that do not likewise cap GHG emissions. The legislation will not pass without them. I'm betting the tariff provision survives.
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