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The House of Representatives on June 26, 2009 approved the 'American Clean Energy and Security (ACES) Act' (H.R.2454). The bill, which passed by a vote of 219-212, includes provisions that could lead to the imposition of tariffs on imports from countries that do not adhere to a future climate-change agreement.
The principal mechanism of this climate-change bill is a 'cap and trade' system that would place limits in the United States on emissions of greenhouse gases from major sources such as power plants, factories and oil refineries. It would discourage the production or use of fossil fuels through regulations, and taxes, and subsidize other types of energy production, such as geothermal, wind, and solar, but not nuclear. The bill would require that the United States reduce carbon dioxide and other greenhouse gas emissions by 17 percent from 2005 levels by 2020 and by 83 percent by 2050. This system has given rise to concerns over the 'carbon leakage' and 'job leakage' that may result if the United States has a stricter environmental regime in place than other countries. Those concerns led in turn to calls for the creation of disincentives to the migration of manufactures to offshore facilities in less stringent countries.
On June 25, 2009 Chairman Sander Levin (Democrat of Michigan) of the Trade Subcommittee of the House Ways and Means Committee released a 40-page 'manager's amendment' to the bill that deals with international tariff and trade provisions. The language amends the Tariff Act of 1930 by adding a new Title IX 'Promoting International Reductions in Industrial Emissions.' The bill directs the United States to negotiate an international agreement on greenhouse gas emissions reductions. All countries, including 'fast-growing developing countries,' would be required to adopt the international agreement or impose upon themselves laws and regulations that impose the same emissions restrictions as does the U.S. law. Upon enactment of the ACES Act, the president would be required to notify U.S. trading partners to take 'appropriate measures to limit the greenhouse gas emissions of the foreign country in order to achieve the purposes 'of Title IX'.' As of January 1, 2020 or earlier, according to the legislation, exports from countries that do not comply with this requirement will be penalized with a border tax that is
designed to minimize or avoid any carbon leakage from the signatory countries to the non-signatory countries, including border measures that may -
(A) require the purchase of allowances (or the agreement-country equivalent thereof) in a volume based upon the industry-specific average volume of emissions per unit of output for the country of origin; and
(B) require the purchase of allowances (or the agreement-country equivalent thereof) at a price equal to the highest market price for such allowances in any agreement country'.'
The bill also would establish an 'international reserve allowance program' for foreign countries that meet emissions criteria set by the United States to purchase allowances for import into the United States of goods listed among the 'eligible industrial sectors' listed by the Environmental Protection Agency. Only imports covered by the allowances would be permitted entry into the United States. Countries exempted from this requirement are those that are determined to have imposed on themselves the same or more stringent laws and regulations restricting emissions, those countries deemed by the United Nations as least developed countries, or those who are responsible for very tiny amounts of global emissions or who export less than five percent of an individual covered good.
At the center of Levin's amendment is a push for an international agreement to restrict carbon emissions. It can be seen as an effort to strengthen the hands of U.S. negotiators as they prepare for the United Nations Climate Change Conference that will take place in Copenhagen December 7-18, 2009, and especially with respect to the 'G-2' negotiations between the United States and China.
Levin defended his amendment against charges that the legislation would harm trade relations with U.S. allies and also conflict with U.S. international trade obligations. According to Levin, Article XX of the General Agreement on Tariffs and Trade allows exceptions for environmental requirements. He also argued that the World Trade Organization (WTO) and United Nations Environmental Program (UNEP) recognize that trade rules 'do not trump environmental rules.'
President Obama has expressed some doubts regarding this approach. At a meeting with reporters at the White House on June 28, 2009, he acknowledged that the bill could spur challenges from trading partners. According to the transcript he said that
At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there ... I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary, given all the other stuff that was done and had been negotiated on behalf of energy-intensive industries.
While acknowledging that 'it is a legitimate concern on the part of American businesses that they are not disadvantaged vis-a-vis their global competitors,' the president noted that 'There are going to be a series of negotiations around this and I am very mindful of wanting to make sure that there's a level playing field internationally. I think there may be other ways of doing it than with a tariff approach.'
The bill now moves to the Senate. Chairman Barbara Boxer (Democrat of California) of the Environment and Public Works Committee plans to mark up the bill during the week of July 27, 2009. Senate Majority Leader Harry Reid (Democrat of Nevada) has told the other committees with jurisdiction over the bill a deadline of September 18, 2009 to discharge the bill, so the legislation can come to the Senate floor for a vote in October.
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