WASHINGTON— Expert panelists and senators questioned at a hearing Wednesday whether U.S. trade competitiveness abroad would be hurt by a House-approved climate change bill.

The bill, which passed in the House of Representatives last month, would cut greenhouse gas emissions significantly by the end of the next decade – down 17 percent from 2005 levels. However, following the testimony of three experts, a debate broiled between Democrat and Republican members regarding the impact of emissions-capping policies on energy-dependent domestic industries and on overall trade competitiveness.

Sen. Charles Grassley, of Iowa, top Republican on the Finance Committee, argued that U.S. enforcement of strict greenhouse capping policies sought by the House legislation would place American products at a disadvantage when faced with restriction-free goods abroad.

In fact, later in the hearing, Sen. Jim Bunning, R-Ky., cited an Environmental Protection Agency estimate that capping policies would cause the U.S. Gross Domestic Product to contract by an annual rate of 1.37 percent.

Bunning also said that it would be difficult to uniformly enforce limits on emissions and impose penalties across diverse energy-dependent companies, where individual greenhouse-gas emissions rates will differ.

“Some profiles of emissions will be worse or less than other companies, but they may be punished all the same by penalties that don’t distinguish between performance levels.”

Bunning used the same logic to argue against the feasibility of America’s role in enforcing a proposed international greenhouse gas emissions agreement – especially as the global community prepares to talk about climate change in Copenhagen, Denmark in December.

He said that it would be difficult to differentiate between countries like India, where the per-capita emissions are one-tenth that of the U.S., and huge emissions-belchers like China. Those kinds of distinctions could create resentment and bring retaliatory sanctions, he said.

However, Sen. Debbie Stabenow, D-Mich., said that the U.S. should stop worrying about what other countries will do in response to U.S. domestic policies, since such countries “already do them anyway.”

“We [the U.S.] are the only ones that don’t stand up for our businesses and our trade policies,” Stabenow continued, saying that the U.S. often accepts to other countries’ sanctions, which are policies in themselves. “We need to do our part to ensure that other countries are living up to their ends of bargains.”

Stabenow used China as an example, saying that the government in Beijing buffers its manufacturing industry with subsidies against emissions guidelines set by World Trade Organization.

“If there is going to be an international agreement on trade emissions, the U.S. needs to take the lead, or else there will simply be no international trade agreement,” said Stabenow, who represents a state hard hit by the struggles of the U.S. automobile industry.

The discussion soon returned to the domestic climate bill, which was approved by the House last month..

Members of the Senate expressed concerns that finances necessary to create capping allowances (credits that forgive a certain level of greenhouse-gas emissions) for domestic industries will be too costly.

However, Sen. John Kerry, D-Mass., said that cap and trade policies will not be so difficult to enforce, since energy-dependent industries occupy a thin slice of the overall economy. He also countered the claim that those industries will be hard-hit, saying that allowances for meeting caps and other protective provisions will be affordable, as those industries occupy only a slim portion of the Gross Domestic Product pie.

“There are a narrow set of industries – very narrow, I want to emphasize – that the GAO [Government Accountability Office] describes as energy intensive and trade exposed,” Kerry stated.
He said he was convinced that the allowance scheme and other available mechanisms offered “enormous capacity” to protect vulnerable industries.

On the panel were Loren Yager, director of international affairs and trade at the Government Accountability Office, Eileen Claussen, president of the Pew Center on Global Climate Change, and Gary Horlick, who owns a law firm. Yager described the financial impact of climate change legislation on industries; Claussen stated that free capping allowances should be given to industries in the initial phase of the bill’s enforcement; and Horlick was most concerned about other countries’ retaliatory actions in response to U.S. emissions policies.