Leveling the Carbon Playing Field: International Competition and US Climate Policy Design

As the US Congress takes up domestic climate legislation and the administration reengages in multilateral climate negotiations, policymakers are particularly concerned about the effect of climate policy on US carbon-intensive manufacturing industries such as iron and steel, cement, paper, and chemicals. Many of these industries are already under pressure from foreign competition, particularly large emerging economies like China, India, and Brazil that are not bound to reduce emissions under the current international climate framework. US policymakers are looking for ways to avoid putting US industry at a competitive disadvantage lest a decline in industrial emissions at home is simply replaced by increases in emissions abroad. While this would be best achieved through harmonized international climate policy, the differences between countries in levels of economic development, historic emissions, and responsibilities arising from future emissions mean harmonization is still a long way off. How can we level the playing field for US carbon-intensive industries during a period of transition, where trading partners are moving at different speeds and adopting a variety of policies to reduce emissions? Can this be done in a way that does not threaten the prospects of broader international agreement down the road? This book evaluates a wide range of policy options, including trade measures on foreign-produced goods (currently included in draft US legislation and under consideration in the European Union).