U.S. group urges "peace clause" in Senate climate bill

WASHINGTON (Reuters) - The U.S. Senate should act to head off a potential trade war by adding a “peace clause” to a climate change bill that threatens China and other countries with a tariff on their goods, a business group said on Friday.

The Los Angeles skyline is obscured by smoke from the Station Fire north of the city August 31, 2009. REUTERS/Freds Prouser

The House of Representatives included a carbon tariff in its climate change bill to address concerns that U.S. steel, cement and other big energy-consuming industries could be badly hurt unless big developing countries also take major steps to cut greenhouse gas emissions blamed for global warming.

But many U.S. exporters are worried the provision will backfire on the United States by inviting countries to impose their own tariffs on U.S. goods.

“Border measures, or carbon tariffs, are a sleeping giant ... in the climate change debate” with a tremendous potential to disrupt trade, said Jeremy Preiss, chief international trade counsel at United Technologies Corp.

Preiss is also chair of the climate working group for the National Foreign Trade Council, a leading business group that represents exporters ranging from Caterpillar to Microsoft.

The group urged the Senate to include language calling for a peace clause against carbon border taxes while countries negotiate an international framework for dealing with trade-related climate concerns.

The Senate also should give the president more discretion not to impose carbon tariffs than allowed in the House version of the bill, the National Foreign Trade Council said.

Both China and India have harshly criticized the House measure as an unfair attack on their trade.


However, after President Barack Obama indicated his opposition to the provision, a group of 10 Democratic senators from industrial states wrote him to insist that a border measure be part of the final bill.

While those senators are likely to succeed, they “don’t fully appreciate the potential vulnerability of U.S. companies to similar measures taken by other countries,” Preiss said.

India, for example, has suggested taxing imports based on an exporting country’s per capita greenhouse gas emissions. That would hit the United States hard because its per capita emissions are higher than most countries. China leads the world in annual greenhouse gas emissions.

U.S. Democratic Senators Barbara Boxer and John Kerry are writing climate legislation and hope to unveil it this month after two delays.

But several Democratic senators have questioned whether it is possible to vote on a climate change bill this year because healthcare reform is taking up so much time.

In addition some lawmakers from agricultural and heavy coal-burning states oppose the bill, saying it would raise energy prices. It is unclear whether the Senate has the 60 votes needed to pass the bill this year.

The Senate inaction has raised concerns countries may not be able to agree on new global treaty to reduce greenhouse gas emission at a meeting set for December in Copenhagen.

But countries could still reach “a strong interim agreement on a basic framework, within which you would keep negotiating toward that ratifiable treaty,” said Elliot Diringer, a vice president at the Pew Center on Global Climate Change.

Reporting by Doug Palmer; Editing by Bill Trott