Bridges Weekly Trade News Digest • Volume 14 • Number 14 • 21st April 2010

US Senate Climate Bill to be Revealed on 26 April

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Three US senators are expected to introduce new climate change legislation on 26 April, media sources reported on Friday. It is still unclear whether the bill will contain a provision for “carbon tariffs” on imports from countries with less stringent climate regulations, but a senior administration official hinted on Tuesday that such a measure was likely.

The bill - which has been crafted over the past six months by Senators John Kerry (a Democrat), Lindsey Graham (a Republican) and Joe Lieberman (an Independent) - reportedly keeps the cap-and-trade structure that was written into the version of the bill passed by the US House of Representatives last summer. Under the Senate bill, however, the system would apply only to electric power plants until 2016, when it would be expanded to include other large manufacturers. Senator Kerry has insisted that the bill will maintain the goal of securing a 17 percent drop in heat-trapping emissions from 2005 levels by 2020, the same objective that was written into the House bill last year.

Political observer and Washington Post columnist Steven Pearlstein has estimated that the Kerry-Graham-Lieberman bill - or a simplified form of it - has a roughly 50-50 chance of being passed by the Senate this year. Somewhat less optimistic, Emilie Mazzacurati, an analyst at the consulting group Point Carbon, told journalists on Thursday that the bill had just a 30 percent chance of winning senators’ approval in 2010, thanks in large part to opposition from lawmakers from oil- and coal-heavy states, Reuters reported.

Regardless of the bill’s final fate, it will definitely find its way into the Senate’s busy summer schedule, as Majority Leader Harry Reid has vowed to carve out time for debates over the bill on the Senate floor, the New York Times reported. Unofficially, of course, the debate has already begun.

On Thursday, a group of ten Democratic senators, most of whom represent industry-heavy states like Michigan and Ohio, wrote a letter to the bill’s three sponsors urging them to draft the legislation so that it supports US manufacturing.

One of senators’ key criteria was that the bill should include “border measures” that would slap a tariff or other form of adjustment on imports from countries that have not implemented emissions reduction requirements that are “comparable” to those taken by the United States. Such measures would encourage other countries to take similar actions to cut emissions, the senators wrote, and it would help guarantee that the climate bill “will be trade neutral.”

But the notion of including some form of “border carbon adjustment” in a Senate climate bill will likely stir up controversy, both domestically and overseas. The Indian environment minister recently threatened to bring a WTO case against any country that imposes such measures, which are also reportedly being considered in the European Union.

Closer to home, US President Barack Obama spoke out against border carbon adjustment after lawmakers in the House included them in the climate bill they passed last summer. But the president since seems to have changed his mind. The New York Times reported on Tuesday that Carol Browner, Obama’s energy and climate advisor, has said that the administration is open to using trade measures in a climate bill.

“There’s going to have to be mechanisms that recognise they compete in a global market,” Browner said on Tuesday, referring to US manufacturers in sectors like steel, cement, and glass. “I think it’s fair to say a final bill will be very mindful of the needs of these particular sectors of the economy.”

ICTSD reporting; “US climate bill seen raising gasoline prices,” REUTERS, 15 April 2010; “Senate climate bill to be unveiled April 26,” THE NEW YORK TIMES, 15 April 2010; “Congress worked out health care. Is climate change next?” THE WASHINGTON POST, 16 April 2010; “Obama open to trade protections in Senate climate bill, adviser says,” THE NEW YORK TIMES, 20 April 2010.