Source quoted from The International Business at the Center for Strategic and International Studies
Media www.rajawalisiber.com – The Scholl Chair’s agenda for the immediate future includes a number of projects relating to climate and trade. We will shortly be putting out the first of two papers on the politics of the issue, and we will be doing other research related to the stalled Environmental Goods Agreement negotiations, the consistency of border adjustment measures with World Trade Organization (WTO) rules, some intellectual property-related issues, and a look at some new approaches to sustainability. All that means I will be talking about climate from time to time in this column. Today is one of those times.
Our work so far has shown that the United States is not at the forefront of this debate. Thanks in part to the previous administration ignoring the issue for four years, other regions, notably the European Union, have forged ahead of us in developing and eventually implementing solutions. They are also ahead of us in framing public opinion. Climate denial has been dwindling in the United States, but the public still lacks a sense of urgency in dealing with the problem and is far from consensus, or even a majority, in supporting specific actions. The European Union, backed by greater public support, is grappling with specific actions and the details of implementation. It is a foregone conclusion that the European Union will do something—whether it will be wise remains subject to debate—while here in the United States, it is not so clear.
As with many trade issues, the benefits of acting are long term and diffuse, while the costs are short term and specific. A shift away from fossil fuels, which is inevitable, will still cost jobs and hurt our energy companies in the short term, while the benefits of a slower rise in temperature, lower emissions, and as a result, more normal weather, are at best well down the road, and the cause-and-effect relationship will not be known definitively for years.
Thus the U.S. debate remains focused on short-term costs. People want change, as long as it happens to someone else. The consequence is that the Biden administration’s climate mitigation policies depend on carrots rather than sticks—financial incentives to transition away from fossil fuels and toward renewables, support for the development of new sustainable technologies, and support to individuals harmed by the transition, among other things. The administration has worked to enhance domestic production of green manufactured goods, including electric vehicles and batteries.
Biden’s plan includes other incentives, such as a $16 billion investment to create hundreds of thousands of on-site jobs plugging oil and gas wells and cleaning up abandoned mines, a $40 billion investment into sector-based training and re-skilling programs, and a commitment to ensure that displaced workers receive the pensions and health benefits they have been promised.
This may be a politically wise approach. Congress is more likely to vote for carrots than sticks. But there is great concern in the environmental community that this will be too little, too late, and many believe that the administration should move more quickly to sticks—mandatory changes in corporate and individual behavior. The dilemma is that there is not (yet) sufficient political will to impose those measures, which leaves the United States in an uncomfortable position—knowing that it is doing too little but unable to do more.
Meanwhile, the world moves on. The European Union is once again demonstrating its fondness for being the first mover in regulation, just as it has been with privacy, digital trade, and artificial intelligence. Its proposal for climate border adjustment measures (CBAMs) is scheduled to appear July 14. Observers predict it will take at least two years for the proposal to wind its way through the European Union’s parliamentary and member state processes and that the final product will be different from the initial one, but at least the process is moving.
I can see this playing out several different ways for the United States. One possibility is that it will lead to demands here to take retaliatory action against what will be perceived as EU protectionism (even if it is not). That is not necessarily a bad thing if it leads to greater political support here for CBAMs, which will necessarily also require setting a price on carbon, something the United States has resisted. In that scenario, the motivation—retaliation—may be impure, but the result could be constructive advances in U.S. policy and public opinion.
Of course, another possibility is that the European Union’s actions become mired in litigation in the United States, in Europe, and at the WTO, and public opinion moves in the opposite direction, leaving CBAMs and other measures even more problematic than they are now, with the public viewing them as some sort of perfidious European plot that cannot possibly be good for the United States. And, third, it is possible EU action will be ignored here, and we simply continue along our own, slower, path. Right now, I am not taking bets on the outcome.
The important thing to keep in mind is the different pace of public debate. Development of climate border measures raises complex questions of measurement and credibility that cry out for an international agreement. The United States is clearly not ready to engage in that debate. Our public is not where it needs to be to support it, and our politicians, with some exceptions, have not been willing to get out in front of their voters. Until that changes, our domestic policies will be insufficient, and we will find ourselves reacting to the initiatives of others internationally rather than leading by example.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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