China worries about U.S. carbon tariffs

In a speech in the U.S. yesterday, Tung Chee-hwa, vice-chairman of the Chinese People’s Political Consultative Conference (CPPCC) hit out at plans for carbon tariffs in the Democrats' bill for emission controls

"A top adviser to the Chinese government on Tuesday warned that a proposed US border tax on carbon sensitive materials ‘smells of protectionism’ and could spark retaliation from developing countries." Extract from a report in the Financial Times

Tung, the former Chief Executive of Hong Kong, was talking about the Waxman-Markey bill that provides for 'border adjustments' should cap-and-trade costs for energy-intensive industries not be fully offset by U.S. government subsidies. China has been campaigning against this draft legislation since it's introduction.

They are obviously troubled by the apparent decision of the Obama Administration not to oppose the use of carbon tariffs.

When they were introduced a few weeks ago, the Waxman/Markey proposals seemed to be some way short of sufficient support in the Congress. But the U.S. Trade Representative, Ron Kirk, has told Congress that the Obama Administration has an open mind on the use of border-adjustments. The most remarkable thing about his letter is that he doesn't rule them out. Rather, he says only that

"The Administration… does not support any specific measures, including border measures at this time. As we move forward in our engagement with Congress on the design of domestic climate change policy, we will evaluate the various options to address carbon leakage on Capitol Hill"

Those who, like me, were concerned about the protectionism underlying Obama's electoral platform should have their antennas tuned to this. The battle isn't quite joined yet, but it's coming.

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