Obama Wary of Tariff Provision

Trade Proposal in Climate Bill a Potential Problem as Action Moves to Senate

By GREG HITT and NAFTALI BENDAVID

President Barack Obama said the House bill curbing greenhouse-gas emissions that passed by a close vote Friday represents "an extraordinary first step," but said he had doubts about a provision to impose tariffs on goods from countries that don't match U.S. efforts to combat global warming.

After passing by a 219-212 vote, the bill, a priority for President Obama, faces even higher hurdles in the Senate, both from Republicans and from the president's own party, despite a 59-40 majority for Democrats. "It was a struggle to get [climate legislation] through the House, and there's no reason to think it will be any different in the Senate," said Sen. Barbara Boxer (D., Calif.), chairwoman of one panel that has jurisdiction over climate legislation, along with Sen. Jeff Bingaman's (D., N.M.) energy committee. Ms. Boxer said she intends for her environment committee to vote on a version before Congress's August recess.
Several Republicans, criticizing the bill's costs, suggested the House bill has little chance of passage in the Senate. "You're going to find signs on manufacturing doors, if this bill passes, that say, 'Moved, gone to China,'" said Sen. Charles Grassley (R., Iowa) on ABC's "This Week."
Among the most controversial parts of the House bill is the provision inserted by Democratic leaders that would impose tariffs on goods imported from countries that don't match U.S. carbon-dioxide restrictions -- a slap at China and India that some business interests fear could provoke a trade war. The tariff would take effect in 2020 and fall on a range of products from countries that don't adopt similar programs to control emissions.
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"There are critics from the left as well as the right; some who say who doesn't go far enough, some who say it goes too far. I am convinced that after a long period of inaction, for us to have taken such a significant step means that we're going to be in a position to advance technologically, obtain huge gains in efficiency." -- President Obama

Supporters say a tariff is needed to shield U.S. industries such as steel and cement makers from unfair competition abroad. The proposal also is designed to give Congress leverage to force imposition of a tariff even if the president resists.
President Obama, speaking to reporters Sunday, didn't say whether he would veto the bill if the measure remains a part of it, or whether he will work to remove it in negotiations with Congress. "At a time when the economy world-wide is still deep in recession, and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there," he said. He added that he was "mindful" of the need to level the playing field internationally for U.S. business.
The bill would create a system that lets companies buy and sell pollution permits, while complying with progressively tighter caps on emissions. U.S. greenhouse-gas emissions would be cut by 17% from 2005 levels by 2020, and 83% by midcentury.
It also would mandate that coal-burning electric utilities use greater amounts of renewable fuels like solar and wind power and would provide incentives to develop clean-energy technologies. The legislation gives businesses -- including power generators -- more than 60% of the pollution permits for free in the early years of the program.
Business factions remain split. The U.S. Chamber of Commerce and the National Association of Manufacturers lobbied against passage, while groups that represent airlines, oil producers and mining companies expressed disappointment, saying the bill would lead to onerous new costs. "It will affect every aspect of the American economy, harming our ability to compete in the world and provide secure and affordable energy to American consumers and businesses," the National Mining Association said in a statement.
But the Edison Electric Institute, which represents investor-owned utilities, backed it, as did companies with big investments in alternatives to fossil fuels. "The House has taken an important first step on a road that will help the industry scale to a point at which we no longer need government incentives," said Bryan Ashley, vice president of Suniva Inc., a Georgia solar-cell manufacturer.
The bill contained a range of compromises. The original goal for 2020, for instance, was a cut of 25% of emissions from 2005 levels, not 17%. But leaders made a deal with Agriculture Committee Chairman Collin Peterson (D., Minn.), who spoke for many rural lawmakers, letting the Agriculture Department run a key program for farmers, rather than the Environmental Protection Agency. Some Farm Belt lawmakers fear the EPA would be less friendly to agribusiness.
Even after those changes, nearly one in five Democrats defected from the House bill. That the climate bill is coming at the same time as the president's health-care plan makes it an even tougher sell to some from conservative districts.
Similar compromises to woo centrist Democrats loom for the health-care bill, which faces votes in both chambers later this summer. Some Senate Democrats are whittling down provisions considered sacrosanct by liberal advocates, reducing proposed subsidies for the uninsured and opposing the creation of a government-run plan to compete with private insurers.
The intraparty tensions are frustrating some Democratic leaders and activists, who believe they have an opportunity to enact a broad liberal agenda. MoveOn.org announced Friday that it is running ads criticizing Sen. Kay Hagan, a newly elected Democrat from North Carolina, for opposition to a publicly run plan as part of a health overhaul.
Mr. Obama and his top aides at the White House played down intraparty tensions, as well as the 44 Democrats who voted against the climate bill. "I think those 44 Democrats are sensitive to the immediate political climate of uncertainty around this issue," the president said.
A senior aide even suggested the climate vote "has helped health care enormously," demonstrating that Congress is capable of confronting big issues.—Stephen Power contributed to this article.
Write to Greg Hitt at greg.hitt@wsj.com and Naftali Bendavid at naftali.bendavid@wsj.com