Cap-and-trade and carbon tariffs — the economic downside

Today the lead editorial in the Wall Street Journal takes a hard look at some of the negative economic consequences of touted cap-and-trade programs to reduce CO2 emissions and the possibility of carbon tariffs to protect U.S. businesses.  Not only would such programs cost “heavy-industry” jobs already suffering in the global recession but also could lead to trade wars as developing countries retaliate:

So in addition to all the other economic harm, a cap-and-trade tax will make foreign companies more competitive while eroding market share for U.S. businesses. The most harm will accrue to the very U.S. manufacturing and heavy-industry jobs that Democrats and unions claim to want to keep inside the U.S. A cap-and-tax plan would be the greatest outsourcing boon in history. And it may even increase CO2 emissions overall, because the developing nations where businesses are likely to relocate — if they don’t simply close — tend to use energy less efficiently than does the U.S.

Meanwhile, carbon trade barriers would almost certainly violate U.S. obligations in the World Trade Organization. Since carbon energy cuts across so many industries, a tariff would presumably have to hit tens of thousands of products. Any restriction the U.S. imposes on imports can also just as easily be turned around and imposed on U.S. exports, whatever their carbon content.

See a post last Friday with questions from House Ranking Members on committees with oversight in these areas.