Carbon Tariff Provisions Stoke Debate in the U.S. and Europe

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(CNSNews.com) – The same “carbon tariff” provision in U.S. cap-and-trade legislation that has alarmed American business groups made waves over the weekend in the European Union, where several governments fretted that the proposal could undermine the drive to achieve a new global climate change agreement by year’s end.

India and China, the U.S. trade partners most likely to be affected by the envisaged punitive measures, are protesting strongly, and the U.S. Chamber of Commerce has joined three other business organizations warning the Senate that the tariff provision “could trigger a green trade war.”

The Waxman-Markey American Clean Energy and Security Act contains a clause that would impose tariffs or “border measures” by 2020 on imports of certain goods from countries not seen as doing enough to reduce their emissions of carbon dioxide (CO2) and other “greenhouse gases” blamed for climate change.

The legislation passed in the U.S. House last month by a seven-vote margin, and a Senate version is now under consideration.

In Europe, France is pushing its E.U. partners to consider carbon tariffs as the 27-member bloc formulates a common position ahead of a major U.N. conference in Copenhagen, Denmark in December aimed at reaching a global agreement to replace the Kyoto Protocol.

But the French suggestion came up against strong opposition from several quarters.

At a meeting of environmental ministers in Sweden, the host government, which holds the E.U.’s rotating presidency, said the tariff issue would complicate the negotiations in Copenhagen.

Swedish Environment Minister Andreas Carlgren called on other member states to reject the proposal.

The German minister responsible for climate change issues said developing countries would see the move as a sign of Western protectionism – “a new form of eco-imperialism” – and a violation of World Trade Organization (WTO) rules. His British counterpart also expressed skepticism.

France is arguing that tariffs on uncooperative countries could be a workable idea if the Copenhagen conference does not deliver an agreement to succeed Kyoto when that treaty’s provisions lapse in 2012.

Developing countries led by China and India are loathe to accept mandatory limits on how much CO2 their industries produce, charging that their economic growth should not be hampered by restrictions that wealthy industrialized nations never faced when their economies were at a similar stage of development.

The global recession has merely seen them harden their positions.

Kyoto required industrialized nations to cut emissions by prescribed amounts up until 2012, but gave countries like China and India a pass – despite them being major CO2 emitters. Their exemption was a key reason for President Bush’s rejection of the protocol.

The Obama administration has embraced global efforts to seek solutions to climate change, but China and India have given notice that are not going to cooperate in ways that they consider will be harmful to their interests.

Secretary of State Hillary Clinton got the message directly during her visit to India last week, when Indian environment minister Jairam Ramesh complained that India was coming under pressure to reduce emissions despite having among the lowest CO2 emissions per capita.

“And as if this pressure was not enough, we also face the threat of carbon tariffs on our exports to countries such as yours,” he told her.

The Chinese government said this month that it was “strongly opposed” to carbon tariffs, charging that they would breach WTO rules and “disrupt the order of international trade.”

Beijing’s commerce ministry said in a statement that the proposals also went against the spirit of the Kyoto Protocol principle – that developed countries should bear the burden of carbon emission reductions.

The “true aim” of the U.S. carbon tariff proposal, the communist party organ People’s Daily said in an editorial, “is to protect its own trade under the guise of protecting the environment.”

‘Disrupt global trading system’

The tariff provision was included in the Waxman-Markey bill to win over lawmakers from states with energy-intensive industries, amid arguments about the need to “level the playing field” for U.S. companies competing with those elsewhere not bound by emission caps. French President Nicolas Sarkozy has made similar assertions on behalf of European firms.

The American Iron and Steel Institute lobbied hard for the inclusion of protection measures, but in the end said those incorporated in the legislation passed by the House were inadequate.

They would undermine “both the environmental objective of the bill and the competitiveness of U.S. products,” said AISI president and CEO Thomas Gibson.

Nonetheless, the U.S. Chamber of Commerce, National Foreign Trade Council, Emergency Committee for American Trade and U.S. Council for International Business are urging Senate leaders to remove the tariff provisions from the measure.

In a letter to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell, they said the provisions “could negatively impact U.S. relations with key trading partners and disrupt the global trading system.”

“We believe any successful legislation that aims to restrain greenhouse gas emissions must abide by U.S. international trade obligations and should encourage action by other major emitting countries,” the business organizations said.

President Obama has praised the cap-and-trade legislation but says he opposes the tariff measure.

Another section that could prove a headache for the administration if it is retained in the final act outlines the “negotiating objectives” of the U.S. when the new global climate change pact is being hammered out.

Directly confronting the Chinese and Indian stance, it says the U.S. objective should be for “an internationally binding agreement in which all major greenhouse gas-emitting countries contribute equitably to the reduction of global greenhouse gas emissions.”

And, the measure adds that a negotiated agreement should include provisions that address “competitive imbalances” that may be created between countries in domestic and export markets.