The House of Representatives passed on 26 June by a vote of 219-212 a comprehensive climate change bill that, among other things, allows for the imposition of tariffs on certain imported goods. According to the House Energy and Commerce Committee, the climate change bill (H.R. 2454) includes the following provisions.
- requires electric utilities to meet 20 percent of their electricity demand through renewable energy sources and energy efficiency by 2020
- invests US$190 billion in new clean energy technologies and energy efficiency, including energy efficiency and renewable energy (US$90 billion in new investments by 2025), carbon capture and sequestration (US$60 billion), electric and other advanced technology vehicles (US$20 billion), and basic scientific research and development (US$20 billion)
- mandates new energy-saving standards for buildings, appliances and industry, including new standards for certain lighting products (e.g., outdoor luminaires, outdoor high light output lamps and portable light fixtures), commercial furnaces and certain appliances (e.g., water dispensers, commercial hot food holding cabinets and portable electric spas)
- reduces carbon emissions from major U.S. sources by 17 percent by 2020 and over 80 percent by 2050 compared to 2005 levels
The bill that was originally approved by the Energy and Commerce Committee would also have allowed the U.S. to impose border tariffs on carbon-intensive products from non-carbon capping countries after 1 January 2025, but the House Ways and Means Committee had raised concerns that this provision would not be sufficient to prevent "carbon leakage," that is, the risk that greenhouse gas emissions and jobs would move from the U.S. to countries that adopt less-stringent or no restrictions to address climate change. As a result, the bill approved by the House requires the imposition of border measures in 2020 if no international agreement addressing carbon leakage has been negotiated by then, unless the president determines that such measures would not be in the national interest and Congress passes a resolution agreeing with that determination. Certain sectors could be exempted but under conditions that are more restrictive than originally proposed.
This provision has obviously caused a great deal of controversy in certain quarters and could potentially be amended before the bill is eventually enacted into law. President Obama is among those who have expressed concern about the effect such tariffs could have on U.S. businesses. Obama has been a vocal proponent of climate change legislation and has made environmental issues a key component of his administration's domestic energy policies and international trade agenda for 2009.
While Obama has referred to the House bill as "an important first step," he is also keenly aware that environmental reform should not be used to advance policies that may be regarded as protectionist in the U.S. and abroad, especially at time of global economic stress. Indeed, the president recently stated that the United States has "to be very careful about sending any protectionist signals out there" given the on-going economic recession and accompanying drop in global trade. While it is important to "make sure that there's a level playing field internationally," the president said, "there may be other ways of doing it than with a tariff approach," and the administration will "have to do a careful analysis to determine whether the prospects of tariffs are necessary."
The U.S. Chamber of Commerce has expressed serious concern about imposing tariffs on carbon-intensive imports, charging that such tariffs would violate U.S. trade obligations and potentially provoke a trade war of devastating consequences. More broadly, the Chamber believes that the climate change legislation approved by the House is "fundamentally flawed" because it does not adequately balance environmental objectives with the need for economic growth and job creation, promote technology development and deployment, invest in clean energy, promote energy efficiency or address climate change as a global challenge. A basic argument that has been voiced time and again by critics of the House legislation contends that global carbon emissions could actually increase even if the U.S. completely eliminates these emissions because emissions by developing countries are growing rapidly. The Chamber also fears that U.S. jobs would be shipped overseas "where energy is cheaper and environmental restrictions are more lax."
Echoing the Chamber's concerns, House Ways and Means Committee Ranking Republican Dave Camp (Michigan) stated on 8 July that the tariff provisions included in the House climate change bill "are an open invitation for our trading partners to retaliate against American exports and put American workers at a further competitive disadvantage." Camp has also argued that the bill will push even more jobs overseas because mainland China and India have so far refused to adopt similar caps on emissions and urged his Senate colleagues to show "more concern" for U.S. workers and jobs by pursuing a more balanced approach.
Senate consideration of climate change legislation began in early July and there are reports that several Democratic senators, including John Kerry (Democrat-Massachusetts), are working on compromise language that would give the president more discretion on whether to impose border tariffs. Finance Committee Chairman Max Baucus (Democrat-Montana) has also stated that any climate change legislation must comply with international trade rules and avoid actions that provoke U.S. trade partners. On the other hand, a sizable number of Democratic proponents of trade protection in general and border tariffs in particular are expected to push hard for these measures and could withhold their support for the bill if their demands are ignored.
