Climate Policy and Industrial Competitiveness: Ten Insights from Europe on the EU Emissions Trading System
The U.S. House of Representatives recently passed a comprehensive climate and energy bill that includes a cap-and-trade program for domestic carbon emissions, and many lawmakers and stakeholders have voiced concern about potential negative impacts on U.S. industries of such a system. Climate Policy and Industrial Competitiveness: Ten Insights from Europe on the EU Emissions Trading System analyzes the first years of operation of the EU Emissions Trading System (EU ETS) and offers ten recommendations to U.S. policymakers as they debate the design of a potential cap-and-trade program. The potential impact of a U.S. cap-and-trade system on the economic competitiveness of energy-intensive and trade-exposed industries is a major sticking point in the U.S. congressional debate, especially if rival firms in China and India are not subject to equivalent regulations. This paper describes the similar debate that occurred in Europe prior to the implementation of the EU ETS. In the U.S. debate, options for preventing the leakage of jobs and emissions to developing countries could include free allocation of allowances, as well as measures to impose charges on energy-intensive goods from such markets as they are imported in to the United States.