• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Cap and Trade Equals Reduced Trade (Part 6 in a 10-Part Series)

    The economic costs associated with a cap and trade policy are real. Republicans and Democrats alike realize this and have urged caution that a bill must protect American consumers and businesses. One idea floating around to protect American business and manufacturers is a protectionist carbon tariff. Secretary of Energy Steven Chu appears to be open to the idea:

    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.”

    When businesses are faced with the higher costs from an energy tax through a carbon capping policy, they can certainly make production cuts. Another logical solution is for these companies to move overseas where they can make more efficient use of labor and capital

    The economic perils of a cap and trade are bad enough; adding a tariff to carbon-intense imports simply makes it worse, not only for the United States but also for developing countries relying on trade to better their own economies. A carbon tariff would:

    Increase costs for consumers. Not only will our energy costs be higher but now everything we import will be more expensive too. Say goodbye to affordable foreign goods.

    Cause a trade war. Protectionism begets more protectionism. Other countries will view this as unfair, because it is, and respond by implementing more tariffs in retaliation. Other country’s governments may not find it in their interest to pursue a carbon capping policy; punishing them for this decision could ruin trade relationships.

    De-develop the developing world. Developing countries rely heavily on free trade to prosper. Exporting goods in which countries hold a comparative advantage is critical their economic growth, just like it is ours.The developing world is doing just that, developing. For that reason, the technologies they use are newer, cleaner, and more efficient. Penalizing nations for developing is nonsensical.

    Energy is the lifeblood of our economy, but free trade is one of the fundamental aspects of prosperity, not only in the United States but everywhere. When the United States specializes in the production of certain goods and services they can produce more efficiently, it allows other countries to do the same with other products. The result is lower prices and a higher standard of living for us and our trading partner. And Heritage’s Senior Trade Analyst Daniella Markheim adds that this could be, in effect, worse for the environment:

    The gains from trade include economic growth and rising incomes in all countries. For developing countries–which would likely be hardest hit by trade restrictions in climate legislation–the economic stress will be particularly great. This, perversely, will likely increase the harm done to the environment: Economic growth increases the ability for developing countries to afford protecting the environment.

    Historically, as a nation’s prosperity increases, its desire–and more importantly, the resources available–to adopt environmental protections become stronger and result in policies that accommodate the individual needs of the country. Engaging in freer trade can better promote the evolution of good regulations by empowering countries with the economic opportunity to develop and raise living standards.”

    A more prudent and far less costly approach would be to open up trade to share cleaner technologies and increase growth and prosperity.

    Posted in Energy [slideshow_deploy]

    3 Responses to Cap and Trade Equals Reduced Trade (Part 6 in a 10-Part Series)

    1. AntonioSosa, Florida says:

      Cap and Trade “would be the equivalent of an atomic bomb directed at the U.S. economy—all without any scientific justification,” says famed climatologist Dr. S. Fred Singer. It would significantly increase taxes and the cost of energy, forcing many companies to close, thus increasing unemployment, poverty and dependence.

      To increase their power and wealth at our expense, Obama and his billionaire fraudulent friends (Gore, Soros, Goldman Sachs, the Chicago Climate Exchange guys, GE, etc.) have been trying to brainwash us with the man-made global warming scam.

      GE, for example, has bombarded us with daily propaganda — through its NBC networks, that includes MSNBC and CNBC — to make us swallow the scam. Why? Because they stand to make BILLIONS from the scam. Not only GE is the largest wind turbine generator maker, but it may benefit as the sole “secondary market” trader of the cap and trade credits.

      More and more scientists and thinking people all over the world are realizing that man-made global warming is a hoax that threatens our future and the future of our children. More than 700 international scientists dissent over man-made global warming claims. They are now more than 13 times the number of UN scientists (52) who authored the media-hyped IPCC 2007 Summary for Policymakers. http://www.climatechangefraud.com/content/view/35

      Additionally, more than 30,000 American scientists have signed onto a petition that states, "There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gases is causing or will, in the foreseeable future, cause catastrophic heating of the Earth's atmosphere and disruption of the Earth's climate." http://www.petitionproject.org

    2. MAS1916 - Denver, CO says:

      Cap and Trade could be the straw that breaks liberalism's back. Their overreaching agenda is only going to drive costs through the roof. As pointed out in earlier commentary, there is also significant scientific thought that rejects the entire foundation of cap and trade – global warming.

      Interestingly, many of the folks that voted in the current administration, live in New England, where home heating oil and home heating costs are already very high. Seeing these costs rise even further will probably bring demand for government cost assistance – or individual bail outs. Creating government dependency may be the ultimate goal here.

      Stopping the spread of liberal economic ideas that simply don't work and only make peoples lives more difficult will not be easy. Still… there are a few advantages that conservatives are building on.

      http://firstconservative.com/blog/top-ten/conserv

    3. JAC Pa says:

      Are any of the "I voted for Obama becasue he offered hope" crowd paying attention and ready to help return the Fed Gov to its proper size?

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×