The G20, Climate Talks, and Trade Measures: Keeping Jobs in America

The G20 Summit has arrived in Pittsburgh on the heels of the Climate Summit in New York. These back-to-back meetings on the world's climate and the world's economy signify that protecting the planet has economic dimensions.  So let's ask the question that's on many doubters' minds. Won't new climate legislation hurt American industry? Won't it send jobs overseas?

The answer is no, it won't.

The energy and climate bill the House passed in June was carefully designed to keep today's manufacturing jobs here in America and to grow millions of new ones. That is why it won the support of the United Steelworkers of America and other unions and of manufacturing giants such as Alcoa and DuPont.

These companies and unions recognize that the race to lead the global market for clean energy solutions has begun. If America wants to win that contest, we must make a national commitment to reducing carbon emissions, and we must invest heavily in the clean-energy technologies that will get us there.

This is the fastest, cleanest, most cost-effective way to reindustrialize America. It means millions of new, skilled and well-paying jobs

At the same time that we launch this clean energy transformation, we need to make sure we don't inadvertently shift today's manufacturing production and emissions abroad. The House climate bill included two transitional measures to do just that.

1. Carbon Allowances for Energy-Intensive Industries

Companies that manufacture steel, cement, aluminum, or other energy-intensive products and compete heavily with imports are concerned that not only will they have to pay for the carbon pollution allowances they'll need under a climate bill, but then they fear they'll lose business to foreign suppliers from countries without carbon limits. 

That's a legitimate concern. So as a transitional measure, while we work to ramp up climate protection measures in all countries, the House bill provides for these energy-intensive, trade-exposed manufacturers to get most of their carbon allocations for free. The total amount of free allowances for these industries is capped at 13.4 percent of the entire allowance pie, and it starts to phase out after the first 15 years.  

The allowances are designed to neutralize any incentive for American customers to shift to imports, or for American producers to move offshore.

These free allowances are a temporary measure. They are designed to bridge the gap between when the United States passes carbon limits and when China, India, and other nations adopt sectoral caps or full national caps.

NRDC, along with leading labor unions and manufacturers, supports this approach. But some companies are are getting greedy, jockeying for even more free allowances--as much as 20 percent of allowance pie. It's not fair to over-compensate them, especially when the money comes out of someone else's pocket--the pool of money needed to help low income families or to fund clean tech research.

2. The Border Adjustment Starting in 2020

The House bill has a second measure to address these concerns: border adjustments. Border adjustments are another way to level the playing field between nations with carbon limits and those without. If someone wants to import steel into the U.S. from a nation that doesn't adequately control its carbon pollution, they would have to purchase carbon allowances at our border.  

Because this approach could be inflammatory in both international trade circles and climate treaty talks, the House bill allows a decade, until 2020, before border adjustments would kick in. 

The bill also guards against overkill  by making sure that free allowances and border adjustments don't add up to more than what's needed to level the playing field.  The President can dial back both the free allowances and the border adjustments as other countries step up their climate efforts. 

If all goes well over the next decade, there might be no need for the border adjustments at all. But the tool will be there if necessary.

Positioning America to Lead the Clean Energy Market

If we use these two mechanisms correctly, America can seize the green energy opportunity--as well as hold our own in traditional manufacturing. We can even jump ahead of other nations and win a disproportionate share of the market. And in the process, we will create millions of jobs.

But if we go overboard, and permit companies to get free allowances that are worth more than their costs, we will be taking money away from efforts to help struggling families and pay for adaptation.

Instead, we should make sure that workers, manufacturers, and American families all get their fair share.