Getting Closer to the Armageddon Climate Policy Scenario

We’re getting closer to an Armageddon climate policy scenario. Last week ten Democratic Senators told the President that they will not support any global warming legislation that does not protect domestic industry with carbon tariffs. This is a big step toward an economically ruinous trade war.

At issue is the $45 trillion climate question: Who’s gonna pay to green the global economy? The combustion of hydrocarbon fuels-which accounts for 85% of the world’s primary energy-is the “cause” of the global warming “problem,” so the “solution” is to make hydrocarbon energy more expensive, to the tune of $45 trillion dollars, which is what the International Energy Agency estimates it would cost to fight rising temperatures.

China and India refuse to pay. They have bigger fish to fry, like the almost 2 billion people that don’t yet have access to electricity.

As such, if the U.S. and Europe act unilaterally, they would subject their energy intensive industries to a competitive disadvantage to countries that don’t act. Jobs and emissions would be outsourced to Asia.

It’s the Gordian Knot of climate policy: China and India refuse to act, but without their participation, it’s all pain and no gain for countries that do act.

In late June, the U.S. House of Representatives passed major climate legislation (the American Clean Energy and Security Act, a.k.a., the largest tax increase in world history) that includes “border adjustment” measures (i.e., tariffs) on carbon intensive goods from countries that do not have emissions controls in place.

Last week, ten Democratic Senators (Evan Bayh of Indiana; Sherrod Brown of Ohio; Robert C. Byrd and John D. Rockefeller IV of West Virginia; Bob Casey and Arlen Specter of Pennsylvania; Russ Feingold of Wisconsin; Al Franken of Minnesota; and Carl Levin and Debbie Stabenow of Michigan)-whose swing votes are crucial for the passage of any climate legislation through the upper chamber-sent a letter to President Barack Obama stating that, “it is important that such a bill include provisions to maintain a level playing field for American manufacturing.”

To that end, the Senators all endorsed the tariff proposed by the House bill.

That’s a big mistake. China has already intimated that a carbon tariff would be met in kind. A trade war would certainly ensue. China’s communist government depends on export driven growth, so perhaps it would decide to play the hardest of hardball and dump its vast reserves of U.S. debt. The results would be cataclysmic for global prosperity.

There’s a better way: No one should do anything.