'Cap and Trade' Impact on U.S. Competitiveness Modest Says Study

Manufacturing industries with high levels of energy use would lose an average 1% of their production to imports from countries where greenhouse gas emissions are not penalized.

A proposed market to trade rights to emit greenhouse gases would have only a modest impact on the competitiveness of energy-intensive U.S. industries, according to a new study from the Pew Center on Global Climate Change.

Manufacturing industries with high levels of energy use would lose an average 1% of their production to imports from countries where greenhouse gas emissions are not penalized, the report said on May 6.

The estimate was based on an assumption that a ton of carbon dioxide, the main greenhouse gas contributing to global warming, would sell for $15 in an American "cap and trade" market in which industries could buy rights to emit the gases from industries that use less energy.

The cap and trade proposal, which has been championed by President Barack Obama, is contained in a bill now in Congress.

"The analysis shows clearly that, at the price level studied, the potential impacts are very modest and very manageable," said Pew Center President Eileen Claussen. "Policymakers have a range of policy tools to mitigate the modest economic impacts that may be foreseen. The bottom line is that fear of competitive harm should not stand as an obstacle to strong climate policy."

The authors concluded that the negative impact on competitiveness could be offset by policies that specifically target energy-intensive manufacturing industries, including rebates to compensate them for increased regulatory costs.

Copyright Agence France-Presse, 2009

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