Leveling the Carbon Playing Field

by Houser, Trevor; Bradley, Rob; Childs, Britt; Werksman, Jacob; Heilmayr, Robert

• ISBN13: 9780881324204
• ISBN10: 0881324205
• Edition: 1st
• Format: Paperback
• Copyright: 2008-05-01
• Publisher: Peterson Inst for Intl Economics

Summary

As the US Congress takes up domestic climate legislation and the administration reengages in multilateral climate negotiations, policymakers are particularly concerned about the effect of climate policy on US carbon-intensive manufacturing industries such as iron and steel, cement, paper, and chemicals. Many of these industries are already under pressure from foreign competition, particularly large emerging economies like China, India, and Brazil that are not bound to reduce emissions under the current international climate framework. US policymakers are looking for ways to avoid putting US industry at a competitive disadvantage lest a decline in industrial emissions at home is simply replaced by increases in emissions abroad. While this would be best achieved through harmonized international climate policy, the differences between countries in levels of economic development, historic emissions, and responsibilities arising from future emissions mean harmonization is still a long way off. How can we level the playing field for US carbon-intensive industries during a period of transition, where trading partners are moving at different speeds and adopting a variety of policies to reduce emissions? Can this be done in a way that does not threaten the prospects of broader international agreement down the road? This book evaluates a wide range of policy options, including trade measures on foreign-produced goods (currently included in draft US legislation and under consideration in the European Union). Book jacket.

Table of Contents

Preface	p. ix
Executive Summary	p. xv
Acknowledgments	p. xxi
Introduction: How Climate and Competitiveness Fit Together	p. 1
Background	p. 3
Identifying Vulnerable Industries	p. 5
A Broader View of Competitiveness?	p. 10
Options for US Policy Design	p. 12
Cost Containment Mechanisms	p. 15
Price Caps	p. 16
Borrowing and Banking Allowances	p. 18
Free Allocation of Allowances	p. 20
Tax Credits	p. 22
Offsets	p. 23
Exemptions	p. 24
Containing Noncarbon Costs	p. 25
Trade Measures	p. 29
Designing a Trade Measure	p. 30
Scenarios for Implementation	p. 38
Effects on US Producers	p. 42
Implications for International Engagement	p. 55
Coordinated International Action	p. 59
Prospects for International Engagement: The Case of China	p. 62
Models for Cooperation on Industrial Emissions	p. 64
Need for US Leadership	p. 71
Scope for International Agreement	p. 71
Conclusion	p. 73
Cost Containment Mechanisms	p. 74
Trade Measures	p. 75
Coordinated International Action	p. 77
Looking Forward	p. 78
References	p. 79
Glossary	p. 83
About the Authors	p. 87
Index	p. 89
Tables
Manufacturing-sector energy demand by industry, 2002	p. 7
US carbon-intensive industries and key products, 2005	p. 11
Cost containment mechanisms	p. 17
Natural gas and electricity dependence in US industry (share of total energy demand), 2002	p. 19
US imports by origin, 2005	p. 44
US role in global production, trade, and carbon emissions, 2005	p. 61
Figures
Manufacturing's declining role in the United States, 1948-2005	p. 3
US trade deficit and China's share, 1976-2006	p. 4
US industry exposure to climate costs based on energy intensity and imports as a share of consumption	p. 9
Manufacturing share of total CO[subscript 2] emissions, 2005	p. 25
Net imports as share of US demand, 2005	p. 43
Share of US imports from Annex I countries, 2005	p. 45
Share of US imports from non-Annex I countries, 1986-2006	p. 46
Carbon intensity of steel, 2005	p. 47
Energy and carbon intensity index for chemicals, 2005	p. 49
Pulp used in paper production, 2005	p. 50
Cement kiln type and fuel source, 2005	p. 51
Demand growth by country grouping, 1991-2005	p. 53
Chinese production and exports as shares of global supply, 2005	p. 54
Chinese exports as share of domestic production, 2005	p. 54
Annual CO[subscript 2] emissions, historic and projected, 1974-2029	p. 65
Per capita CO[subscript 2] emissions, current and projected	p. 66
Boxes
Carbon tax versus cap and trade	p. 6
Measuring carbon at the border	p. 33
Defining "comparable"	p. 39
US antidumping law: A questionable precedent	p. 41
Porous borders	p. 56
The sanctions track record	p. 57
Lessons from WTO accession	p. 67
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