Can Domestic Climate Policy Address Competitiveness Concerns?
A range of approaches has been considered for implementing sound, domestic climate policy while seeking to “level the economic playing field” with other countries. While no approach is without its flaws (as I describe below), the approach taken in the Waxman-Markey legislation is sensible and pragmatic: in the short term, output-based updating allocations of allowances are employed for a few energy-intensive, trade-sensitive sectors; and in the long term, the president is given the option to put in place (under specific, stringent conditions) import-allowance-requirements in selected cases. In order to explain my reasoning for coming to this conclusion, let’s back up for a moment and reflect on the reasons for the high level of political attention and receptiveness in the United States toward employing a cap-and-trade system nationally to address emissions of greenhouse gases. It is because of the significant economic and political advantages of cap-and-trade systems to address carbon
