Energy Chief Says U.S. Is Open to Carbon Tariff

MARCH 18, 2009


By IAN TALLEY and TOM BARKLEY
WASHINGTON -- Energy Secretary Steven Chu on Tuesday advocated adjusting trade duties as a "weapon" to protect U.S. manufacturing, just a day after one of China's top climate envoys warned of a trade war if developed countries impose tariffs on carbon-intensive imports.

Mr. Chu, speaking before a House 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 President Barack Obama plans to implement over the next couple of years. It is the first time the Obama 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," Mr. Chu said.
Li Gao, a senior Chinese negotiator from the National Development and Reform Commission, told Dow Jones Newswires Monday that a carbon tariff would be a "disaster," would prompt a trade war and wouldn't be legal under World Trade Organization agreements
"It does not abide by the rule of [the] WTO and, secondly, it's not fair," Mr. Gao said, adding that his delegation would relate China's concerns to U.S. officials.
Mr. Chu's comments came amid other signs of concern among U.S. trading partners about protectionist rhetoric and legislation from Washington. On Monday, Mexico announced it would put tariffs on $2.4 billion of U.S. goods in retaliation for a measure to limit the access of Mexican truckers to U.S. roads. "Buy American" provisions tied to the recent stimulus package have prompted concerns from some U.S. trading partners, and trade issues are expected to be prominent on the agenda at meetings next month among leaders of the Group of 20 leading nations.
European Union Trade Commissioner Catherine Ashton said in an interview in Washington Tuesday that she hopes the Obama administration will give strong backing to relaunching talks on the WTO's stalled Doha round at the G-20 meeting. Ms. Ashton said U.S. support for completing a new global trade deal would boost confidence in world markets.
The carbon tax issue is important to energy-intensive U.S. industries -- including paper, cement, fertilizer, steel and glass manufacturers -- that worry that costs imposed by climate-change laws will put them at a disadvantage to rivals in nations that aren't bound by similar requirements.
European Union officials are considering a similar tariff, prompting some developing nations to caution that trade restrictions run the risk of retaliatory action.
China is seeking to require importers of its 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.
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 developed countries. Obama administration officials also agree that developed countries need to help to finance the technology transfer for low carbon energy and efficiency measures.
Write to Ian Talley at ian.talley@dowjones.com and Tom Barkley at tom.barkley@dowjones.com