Earth Equity News

Allaying Competitive Concerns about Climate Policy. Posted by Daniel Hall, Economist.com, July 2, 2008. "Climate policy will raise the price of greenhouse-gas-intensive goods, particularly energy. For domestic producers, especially energy-intensive manufacturers, this will lead to an input cost gap between domestic and foreign manufacturers. The concern is that this will unfairly disadvantage domestic producers, and ultimately shift production and emissions overseas to unregulated regions. The Economist's 'Economic focus' column recently gave an excellent summary of new economic research on the competitiveness impact from regulating greenhouse gases. It rightly noted that this research suggests that by and large most industries are not much disadvantaged by climate policy... Recent global developments seem likely to mitigate the effects on competition. For example, China is doing more to improve the environmental performance of its industry than is commonly perceived. And if recent increases in global fuel prices are here to stay, then increased transport costs may -- for better or worse -- slow globalization and make offshoring less likely. Regardless of the ultimate size of the impact, however, domestic political interests will require that climate policy includes measure to address impacts on competition... Legislators should view claims of widespread disaster among industry from climate policy with skepticism. Impacts will no doubt be felt, but in a limited number of industries. Policymakers should resist the urge to salve competitiveness worries through protectionist trade policies. Rather, free allocation of [emission] allowances -- limited in both scope and duration -- should be used to address concerns about competitiveness."