Climate Conundrum Continues in Run-up to Copenhagen

Originally a the Breakthrough Institute

The United States may be stuck in the middle of a climate conundrum. A proposal to establish border tariffs to account for the carbon associated with the imported manufactured products, like steel, looks critical to securing the support of key swing Senators interested in protecting the competitive position of American manufacturing. ... Yet ... those same tariff provisions that could win passage of a U.S. climate bill are firmly opposed by China and other developing nations and could both damage Sino-American trade relations and fissure international climate negotiations.

Breakthrough's Yael Borofsky wrote that back in October, and this climate conundrum continues to present perhaps the thorniest negotiating point as world leaders prepare to meet for international climate talks in Copenhagen next week. Indeed, on the eve of the global climate talks, the negotiating positions of the United States and major developing economies, including China and India, appear to remain at loggerheads.

In a letter to President Obama today, nine moderate Democratic Senators, all key swings for climate legislation or ratification of any international climate treaty, reiterated their demands that any international climate framework U.S. negotiators sign in Copenhagen must include comparable action from all major economies and allow tariffs to adjust prices on imports from any nation that does not agree to bindings agreements to reduce emissions "in specific trade- and energy-intensive economic sectors."

"Climate change is a serious and growing threat to the United States and the world," the Senators wrote. "Smart climate change policies would guard against these risks while also spurring clean energy investments that promote economic growth and create good domestic jobs."

"Importantly, however, poorly designed climate policies could also jeopardize U.S. national interest," the Senators warned, "by imposing burdens on U.S. consumers, companies and workers without solving the climate challenge."

To address these challenges, the U.S. should seek to negotiate a new international climate agreement under which, "All major economies should adopt ambitious, quantifiable, measurable, reportable and verifiable national actions" to reduce emissions of greenhouse gases.

Furthermore, U.S. climate policy, the Senators wrote, should include provisions to implement border adjustment tariffs if necessary to help shield domestic industries facing international competition from countries that have not implemented carbon reduction requirements for their industrial sectors.

Here's the key excerpt from the letter, signed by Arlen Specter of Pennsylvania, Sherrod Brown of Ohio, Carl Levin and Debbie Stabenow of Michigan, Tim Johnson of South Dakota, Kay Hagan of North Carolina, Claire McCaskill of Missouri, Amy Klobuchar of Minnesota and Mark Begich of Alaska:

"Climate and trade policies should be designed to encourage all major emitting nations to take climate action and to deter the migration of polluting activities from one nation to another. Internationally, the United States' preferred and primary strategy ... should be to negotiate effective bilateral or multilateral agreements on reducing emissions in specific trade- and energy-intensitve economic sectors. Collectively, these new agreements -- whether negotiated under the United Nations, World Trade Organization or elsewhere -- should not only ensure emissions goals are reached but they should also integrate climate objectives into the international trade system, such as through border adjustments on imports from nations that have not yet adopted sufficient emissions control measures. ... Indeed, to promote equitable and effective global action any new U.S. climate change laws should establish a national system of border adjustments, in concert with emissions allowances or rebates to trade- and energy-intesnsive sectors of the economy. Any border adjustment policies should take effect by a date certain if appropriate international agreements have not entered force.

Simultaneously, two Indian newspapers reported over the weekend on a pre-Copenhagen summit in Beijing that included leaders of Brazil, South Africa, India and China, a group collectively dubbed the "BASIC" countries that includes the largest four emitters among the developing world.

The four BASIC nations reportedly agreed on a new draft of a negotiating position that sets all four nations up to collectively walk out on the Copenhagen negotiations if any of their "non-negotiable" planks are violated.

According to the Times of India, the four nations, along with Sudan as the head of the G77, a larger bloc of developing nations participating in the climate talks, agreed on a new draft negotiating position that argues that the Copenhagen framework should largely consist of an extension of the current Kyoto Protocol framework for a second commitment period running from 2012-2020. This seems to suggest that the carbon intensity targets recently announced by China and India would be voluntary goals, not binding commitments.

That runs counter to the U.S. negotiating position, which has remained adamant that the Kyoto Framework, which excluded commitments for developing nations including the big emitters amongst the BASIC countries, is not a workable framework. The United States rejected the Kyoto Protocol and has not participated in the international treaty's current commitment period set to end in 2012.

Furthermore, the BASIC nations' "non-negotiable" planks include a pledge to stand opposed to any global deal in Copenhagen that does not explicitly reject the use of carbon border tariffs or other measures to restrict trade in the context.

The Times of India reports (emphasis added):

Besides the elements of the Kyoto Protocol, there are "significant new features" in the draft proposal worked out by BASIC countries-Brazil, South Africa, India and China-at a meeting here on Saturday, Jairam Ramesh, minister of state for environment and forest said.

These countries have decided not to allow rich nations to make climate change an excuse to set up trade barriers or resort to trade protectionism. Rich countries should be ready to contribute funds for stopping the process of forest degradation including the one in Amazon valley in Brazil and also invest in the process of creating new forests.

The developing nations will also not accept any pressure from developed countries to establish legally binding emission targets at Copenhagen. Developing countries want to be allowed to reduce emissions voluntarily and take what they consider to be "nationally appropriate actions" he said.

Ramesh said India will under no circumstances accept the concept of a peaking year under which each country will have to indicate on what date they will reach the highest level of pollution before beginning to come down.

India will also not accept any unsupported mitigation actions without any effort by developed countries to provide funds and technology support to improve environment in developing nations.

New Delhi has also set its face against any international measurement, reporting and verification of the work done in India for environment protection.

The Indian minister said that China, Brazil and South Africa were also in agreement on these issues.

I have to note that China, India and the other BASIC countries' position on the border adjustments and emissions related to their exports is entirely inconsistent. They have continued to simultaneously argue that they should not be responsible for the emissions associated with the products they produce for export to developed nations and that the developed nations who buy them should be responsible. That's a fair and arguable point. But at the same time, the BASIC countries vehemently object to any border adjustment tariffs which would be a clear way for importing developed nations to take responsibility for the emissions associated with their imports (e.g. by internalizing the price of pollution associated with them).

The key, of course, is that China, India, Brazil and South Africa each put their economic development first and foremost, and border tariffs equal less exports. That's simply unacceptable to them (for easy to understand reasons).

I'm not exactly sure how this issue resolves, and it seems nearly impossible to imagine a U.S. Senate ratification of a treaty, let alone passage of a climate bill, that does not address the tariffs issue. At the same time, I can scarcely imagine China, India and the BASIC countries backing down on this issue given the central role exports play in each nation's economy.

Stay tuned. I don't envy the negotiators now embarking for Copenhagen...