Climate & Dingell:CLIMATE: Dingell faces 'difficult' decisions on developing-country emissions (03/06/2008)
Darren Samuelsohn, E&E Daily senior reporter
A key House subcommittee sorted yesterday through different ideas for confronting global warming in the United States while also pushing for greater action in China, India and other developing countries.
"This is one of the most difficult issues Congress faces in crafting climate change legislation," House Energy and Commerce Chairman John Dingell (D-Mich.) said at the start of a nearly four-hour hearing.
Dingell outlined several principles for how Congress should engage the developing world while at the same time establishing a mandatory cap-and-trade program that seeks to limit U.S. emissions between 60 and 80 percent by midcentury.
First, Dingell said the U.S. climate law should include a provision that presses developing countries into limiting their own emission growth "on a timetable that meets both environmental and trade competitiveness concerns."
The law must be crafted with the understanding that other countries will challenge it before the World Trade Organization court in Geneva. But while Congress will try to pass a law that survives a WTO challenge, it also must try to find an "acceptable" economic risk if it does get overturned, he said.
Rep. Rick Boucher (D-Va.), chairman of the House Energy and Air Quality Subcommittee, emphasized the need to include language that presses developing countries to clean up their emissions. He recalled the Senate's 95-0 vote in 1997 that opposed U.S. participation in any international climate treaty that does not have the developing nations on board.
"We will not have such an omission in the legislation we will move through this subcommittee," Boucher promised.
But top Republicans were highly skeptical that a new U.S. climate law would make any difference given soaring emissions rates abroad.
"Even if the United States devised the strictest regime to reduce greenhouse gases, these reductions could be dwarfed and negated by emissions increases coming from the developing world," said Energy and Air Quality Subcommittee ranking member Fred Upton (R-Mich.). "We cannot place enough emphasis on the fact that this is a global issue requiring a global solution."
Rep. Joe Barton (R-Texas), the ranking member of the full Energy and Commerce Committee, said he wasn't convinced climate change even posed a problem.
"This is not a video game," Barton said. "We can literally wreck the world's dominant economy with all the best intentions for protecting our environment and our climate and then we'll look back 20 or 30 or 40 years from now, when we're last year's great power, and say, 'What happened?'"
Trade restrictions, intensity standards, free allowances
Representatives from industry and environmental groups promoted several ideas on how to accomplish the Democratic chairmen's stated goals in upcoming climate change legislation.
American Electric Power CEO and President Michael Morris presented an approach already in play in the leading Senate bill on global warming. Under Morris' plan, Congress would require major emerging economies to set their own stringent climate policies or purchase allowances in the new U.S. carbon market for their exports to the United States.
The threat of the U.S. trade restrictions would lead China, India and other developing nations to set up their own equally strong climate programs, Morris said, acknowledging that such a scenario would likely be the subject of a WTO court fight.
A Senate bill headed for floor debate this spring from Sens. Joe Lieberman (I-Conn.) and John Warner (R-Va.) includes the AEP plan, which was co-written nearly a year ago by the International Brotherhood of Electric Workers. Morris insisted that the proposal had been carefully vetted to withstand WTO scrutiny.
Former Rep. Jim Slattery (D-Kan.), appearing on behalf of several major U.S. steel industry interests, suggested a carbon intensity standard for steel and other energy-intensive products, rather than a mandatory cap on U.S. emissions.
Under this approach, all U.S.- and foreign-made products sold in the United States would have to meet a limit on how much carbon dioxide and other greenhouse gases they emit during their production. Slattery said this plan also would survive a WTO challenge.
Slattery, now working at the Washington law firm of Wiley Rein, said the iron and steel industry did not back the basic premise of a mandatory limit on greenhouse gases. "I'd be remiss if I didn't tell you that the U.S. steel industry still has grave doubts about a cap-and-trade regime," he said.
The Lieberman-Warner bill's trade provisions are "inadequate," Slattery added. Namely, the legislation should impose carbon restrictions simultaneously on both domestic and foreign firms selling in the U.S. market. He also questioned allowing the president to waive the requirements on foreign manufacturers.
Boucher asked witnesses if there was a way to tie together the best pieces of the two approaches. While the congressman did not elaborate on what exactly he had in mind, both Morris and Slattery said their proposals were not too different.
David Doniger, director of the Natural Resources Defense Council's Climate Center, said his group supported the Lieberman-Warner bill's trade restrictions.
But he also gave lawmakers another idea for offsetting any damages to U.S. industries -- such as iron and steel, cement, glass, pulp and paper and chemicals -- which face competitive disadvantages from companies located in countries without strict climate regulations.
Congress could give away about 10 percent of the allowances for free so long as the company maintains employment in the United States. The free credits also would phase out by the time the trade threats come into play in 2020. "NRDC does not suggest the use of free allowances or auction revenues lightly," Doniger said.
'A two-way street'
Lawmakers also heard warnings that they may be driving U.S. trade policy in the wrong direction.
"I'd caution this committee against taking at face value any assurances from brave lawyers that such and such a proposal is immune from WTO attack," said Gary Hufbauer, a trade expert from the Peterson Institute for International Economics.
"There's hardly any trade restrictive measure that would not invite WTO attack," Hufbauer added. "We do not need to trash the world trade system ... to get meaningful carbon emissions."
Hufbauer reminded lawmakers of the prospects for an escalating trade war -- something U.S. Trade Representative Susan Schwab discussed in a letter to the House subcommittee.
"It's going to be a two-way street," Hufbauer said. "If we go ahead and start imposing these wily-nilly we can expect return payment."
Christopher Wenk, senior director of international policy at the U.S. Chamber of Commerce, predicted trade disputes could arise with Mexico and Canada under the North American Free Trade Agreement. Wenk noted that several other countries export raw and intermediate products like oil and minerals into the United States: Nigeria, Ecuador, Indonesia, Malaysia and South Africa. All may dislike being swept into a U.S. climate law.
"It is safe to assume that we could screw up trading relationships around the world before we even got to a possible WTO dispute settlement proceeding," Wenk said, adding that the United States in 2007 traded $83 billion in combined goods with China and India alone.
Stronger U.S. leadership on climate on the international stage could address those concerns, Doniger said, citing the outcome of the U.N. climate talks in Bali where developing countries accepted "nationally appropriate mitigation actions" that must be "measurable, reportable and verifiable."
"They're indicating that if we act, they'll act too," Doniger said.
To get those countries moving, Doniger said the United States' new climate law should offer greater funding for international assistance on development of low-carbon technologies, as well as for reductions in deforestation rates and adaptation. "Then the trade measure, whichever form it takes, to me becomes a last resort for the recalcitrant," he said.
Click here to view the U.S. Trade Representative's letter.