Tuesday, March 17, 2009

Ah-Chu! Although we are all for a clean environment Mr. Chu, we are staunchly opposed to Cap & Trade Rule

WASHINGTON (Dow Jones)--A day after one of China's top climate envoys warned of a trade war if developed countries imposed tariffs on carbon-intensive imports, U.S. Energy Secretary Steven Chu advocated adjusting trade duties as a "weapon" to protect U.S. manufacturing. Chu, speaking before a House of Representatives science panel, said establishing a carbon tariff would help "level the playing field" if other countries haven't imposed greenhouse gas reduction mandates similar to the one U.S. President Barack Obama plans to implement over the next couple of years. It is the first time Obama's administration has made public its view on the issue. "If other countries don't impose a cost on carbon, then we will be at a disadvantage...[and] we would look at considering perhaps duties that would offset that cost," Chu said. A preponderance of U.S. federal lawmakers who are crafting climate legislation say they won't sign greenhouse gas legislation into law unless it has a time-table for countries such as China and India to establish binding reductions and a tariff to protect U.S. business. Those measures were fundamental in getting labor union support last year for a Senate proposal that ultimately failed. Li Gao, a senior Chinese negotiator from the National Development and Reform Commission, told Dow Jones Newswires Monday that such a tariff would be a "disaster," would prompt a trade war and wasn't legal under World Trade Organization agreements. His boss, Xie Zhenhua, a vice chairman of the NRDC and China's top climate envoy, Monday met with his counterpart, Department of State's Todd Stern. The delegation will also be meeting with Obama's climate czar, Chu and other senior administration officials. "It does not abide by the rule of [World trade Organization] and secondly, it's not fair," Li said, adding that his delegation would relate China's concerns to U.S. officials. Domestic industries, such as energy-intensive paper, cement, fertilizer, steel and glass manufacturers, are worried the increased cost burdens imposed by climate change laws will put them at a severe competitive disadvantage to their international peers whoaren't bound by similar requirements. The issue has become controversial in international negotiations as European Union officials are considering a similar tariff, but many developing nations caution that trade restrictions run the risk of retaliatory action. In the U.S., although there's disagreement about the schedule for phasing in a carbon tariff - with proposals ranging from 2012 to 2020 - the policy has strong support from industry. Some of the country's largest and strongest unions, including the AFL-CIO and the International Brotherhood of Electrical Workers, support what is for them a competition-protection clause. Officials from American Electric Power Co. Inc. (AEP), which helped to write the language in the Senate climate proposals, have said the tariff requirement would only apply as a measure of last resort, and the U.S. would make good-faith efforts in the meantime to encourage other countries to cut greenhouse gases. But China is instead seeking to require importers of carbon-intensive goods to bear the emission costs, concerned that targets such as those proposed by the U.S. would cripple the nation's growth as an industrializing nation, arguing for a more lenient approach as it develops. Although with 1.32 billion people and developing demand forcing the country to build a new coal-fired plant every week, China points to the fact that its carbon dioxide emissions per capita is around 20% that of the U.S. In his 2010 budget, Obama late last month targeted a reduction of 14% of greenhouse gas emissions from 2005 levels by 2020 and 83% below 2005 levels by 2050. The U.S. does agree with China that an international agreement should be based on a principle of "common but differentiated responsibilities" that allows a less stringent and longer-term flexibility for developing countries. Obama's officials also agree that developed countries need to help finance the technology transfer for low carbon energy and efficiency measures. -By Ian Talley, Dow Jones Newswires; 202-862-9285; ian.talley@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=u8iDMvqaGGE59ulN8%2FBABQ%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires March 17, 2009 15:29 ET (19:29 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 03 29 PM EDT 03-17-09

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