What does it take to get the US on the carbon program?

U.S. House of Representatives Committee on Energy and Commerce staff has published a "Climate Change Legislation Design White Paper" in February 2008.

The baseline for the paper is that any US commitment to a climate change program would require incentives for developing nations specifically China and India to curb their emissions. The rational behind this twofold:

1. There is only impact of such a program if the developing countries do their part

2. Creating a level playing field for the US economy

The white paper discusses policy options in the following three categories:

1. Border adjustments such as tariffs

2. Performance standards such as emissions standards or carbon intensity based regulations

3. Carbon Market Design imposing conditions on other countries' access to a US carbon market

I think the key success factor for such policies is the creation of win-win situation which satisfy the US concerns and also help the developing nations to curb their emissions. The combination of tariffs with the re-investment in carbon reduction activities in the source countries I have been proposing may be just such a solution.

EPA to work on GHG reporting rule

Buried in the $500 billion omnibus budget package signed into law by President Bush Dec 27 is a provision that requires EPA to establish a mandatory program that will require U.S. companies by mid-2009 to report their GHG emissions. The mandate in the omnibus budget package requires EPA to publish a draft GHG reporting rule by June 2008 and a final rule by June 2009. For details, see Diane Feinstein's press release.

China on "transfer emissions"

For the first time, I saw an article where a Chinese source is quoted on the carbon emissions associated with exported goods and services:

He [Cao Bochun, vice director of the Environment and Resources Protection Committee of the Chinese National People's Congress] also rebutted criticism of China's increasing greenhouse gas emissions, saying most of the critics have ignored a fact that transfer emissions account for some 30 percent of China's total greenhouse gas emissions, which means China has shifted some emission pressures from a lot of countries.

On Carbon Tariffs

Carbon tariffs have been making their debut in the public debate during the last couple of months. A good summary is provided by the German news weekly Der Spiegel.

The January 4th The Financial Times editorial "The Greening of Globalisation" argued that discussion on carbon tariffs is "rhetorical protectionist sabre-rattling to actual restrictions on international trade in goods and services".

Gernot Wagner and I argued against this position in our letter to the editor. Our two key messages are:

• While negotiating multi-lateral agreements on CO2 emission reductions is very complex, CO2 tariffs provide means for (unilateral) action
• We propose to not sink the tariffs in government coffers, but directly invest them into CO2 emission reduction projects in the producing / exporting countries, creating a win-win situation.