The U.S. Climate Change Bill: International Trade Implications & China

On China Law and Policy, Elizabeth Lynch writes a lengthy post, including a podcast interview with Jake Caldwell, director of Policy for Agriculture, Trade & Energy at the Center for American Progress, to help explain implications of the U.S. Climate Change Bill on trade with China:

This past June, the U.S. House of Representatives passed the American Clean Energy and Security Act of 2009 (the “Climate Change Bill”). Far-reaching in its impact on the U.S. economy and particularly detrimental to certain energy-insensitive sectors, debate in the Senate will become increasingly cantankerous as special interests and certain states lobby for protection.

And while the Bill, through a series of complicated cap-and trade equations and a plethora of subsidies to renewable energy, has the potential to completely alter the domestic market, debate thus far has been about its global impact. With fear that countries like China will not pass legislation to cap their domestic industries’ carbon output, the House added two provisions to protect U.S. industries from companies in countries that are not similarly restrained. Out of a 1,400 page bill, these two provisions have become the center of the debate, some calling these provisions much needed protection and others calling them tariffs.

But conspicuously absent from these discussions is an analysis of what is really going on here. How exactly do these provisions work? Will they have the intended effect of maintaining the competitiveness of U.S. industries or are they attempts by certain industries to protect their profits? Will these provisions bring countries like China to the table in Copenhagen or will they ultimately produce a tariff war? Can they withstand a challenge under global trade rules?

On a related topic, read an interview on China Dialogue with Li Lailai, deputy director of the Stockholm Environment Institute, about China’s position on climate change policy and solutions:

QD: The post-Kyoto climate-change talks have continued on that basis. What suggestions do you have for China’s stance at these talks?

LL: First, we need to clarify the different responsibilities of developed and developing nations.

Let’s start with technology transfer: undoubtedly, less populated and more technologically advanced developed nations should be aware that they have written the rules of the game, and thus have a natural advantage. But climate change cannot be tackled unless everybody has the necessary technologies – hence technology transfer is needed. The largest obstacle here is that developed governments maintain that these technologies belong to private companies, and that governments cannot interfere in the market-led exchange of technology. But this is merely an excuse and avoids responsibility. Governments need to take action on climate change, removing intellectual property and other trade barriers, so that developing nations can get the technology to combat climate change – or there will be no joint action to speak of.