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

As political momentum surrounding climate change builds in the US, policymakers are taking a fresh look at national climate policy and American involvement in multilateral climate negotiations. And as in years past, the potential economic impact of any US effort to reduce greenhouse gas emissions stands as a central question in the Washington policy debate. Of particular concern is the effect climate policy would have on carbon-intensive US manufacturing. 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. As the Congress takes up domestic climate legislation and the Administration reengages in multilateral climate negotiations, policymakers are looking for ways to avoid putting US industry at a competitive disadvantage vis-à-vis countries without similar climate policy, 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 level of economic development, obligations stemming from historic emissions and responsibilities arising from future emissions, mean harmonization is still a long way off. The question then, in the design of domestic US climate policy today, is how to level the playing field for 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...and how to do so in a way that doesn't threaten the prospects of broader international agreement down the road. This book, a collaboration between the Peterson Institute for International Economics and the World Resources Institute, tackles these issues through an assessment of the economics and trade flows of key carbon-intensive industries. They evaluate a wide range of policy options, including those that would impose carbon costs on foreign-produced goods at the border (currently included in draft US legislation and under consideration in the EU) in terms of their effectiveness in reducing emissions and addressing competitiveness issues and their impact on health of multilateral trade and climate negotiations.

Trevor Houser, visiting fellow at the Peterson Institute for International Economics during 2009–15, is partner at the Rhodium Group, where he leads the firm's energy and natural resources practice. He also codirects the Climate Impact Lab, a collaboration of leading research institutions combining climate, economic, and data science to quantify the risks climate change presents. During 2009, he served as senior advisor to the US State Department, where he worked on a broad range of international energy and environmental policy issues.

Rob Bradley is director of the International Climate Policy Institute Initiative at the World Resources Institute (WRI). He has published research on international climate agreements, emissions trading, biofuels, rural electrification, adaptation, forests and climate and developing country policies. Before joining WRI, he worked on European and international climate and energy policy and was a member of the working group to design the EU Emissions Trading Scheme.

Britt Childs is a research analyst with the international climate policy team at the World Resources Institute.

Jacob Werksman is an international lawyer specializing in environmental and economic law, and directs the Institutions an dGovernance Program at WRI. He served as associate director inthe Global Inclusion Program of the Reckefeller Foundation. From 2002 to 2004, he was environmental institutions and and governance adviser to the United Nations Development Programme in New York.

Robert Heolmayr is a research assistant at WRI. His work focuses on federal climate change policy and corporate deployent of renewable energy. As part of the Green Power Market Development Group, he draws on his experience in the private sector to develop innovative green power products and strategies for corporate consumers.