ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Monday, March 17, 1997 TAG: 9703170089
SECTION: EDITORIAL PAGE: A-5 EDITION: METRO
SOURCE: NICOLE V. CRAIN
AT A TIME when productivity gains combined with new energy-efficient technologies are increasing the global competitiveness of U.S. goods, the White House proposal to curb greenhouse emissions will have the opposite effect. It will slow our economy and may lead to trade deficits with other nations.
The economic consequences of the Clinton administration's proposal is a direct result of opposing policies for "developing" versus "industrialized" nations. Developing nations are not subject to any greenhouse-emissions cap under this plan, while industrialized nations are subject to a negotiated cap.
Carbon taxes and regulatory fees resulting from this plan will cause costs of production in the United States to rise, while leaving unaffected the production costs of developing nations. As production costs rise, prices to consumers increase, so the United States becomes relatively less competitive.
China, India, Brazil and other exempted developing countries reap an instant trade advantage. This trade advantage leads to more production in developing nations, even if additional carbon dioxide emissions from developing nations overwhelm reductions realized by the United States and other developed nations.
The proposal's costs from lower output or higher taxes disproportionately affects those American states with energy-intensive industries, such as petrochemicals, oil refining and mining. Virginia ranks among the hardest hit.
If industrialized nations were relatively large polluters in the global scheme of things, the administration's proposal could be rationalized. This is not the case. Developing nations generate about half the world's total emissions, a figure expected to rise to nearly three-quarters even without the proposed Clinton cap.
The alternative to the Clinton plan is not to scrap any hope of greenhouse-emission reduction. Rather than shift emissions from industrialized to developing nations, we should enact a plan to reduce global emissions. A per-capita greenhouse gas emission credit by country would produce this result; set a global emissions figure and allocate it among countries based on population. Cost-benefit analysis would inform the trade-offs of setting the carbon dioxide emissions figure at various levels.
For example, under an alternative plan based on market incentives, China might obtain the highest quantity of emissions credits. China could sell any (or all) of its credits on a global secondary emissions market. This means that U.S. manufacturers may choose between becoming cleaner or buying emission credits. If they purchase credits for one year rather than implement technologies to reduce emissions, the next year they face the same options.
Under this plan, any country exceeding its allotment pays a regulatory fine. The significant differences between this plan and the one proposed by the administration are that technological innovation, market mechanisms and total global emissions are the defining characteristics of this alternative approach to reducing greenhouse emissions.
The alternative market-based approach also addresses the spurious argument that industrialized nations became rich through polluting. Leaving entirely aside the fact that until recent decades greenhouse emissions were not understood, much less a concern, developing nations could make money selling their unused emission credits. Furthermore, developing nations generally have higher populations than industrialized nations, and so would benefit from a per-capita allocation of emission credits.
Finally, significant sources of greenhouse emissions not addressed in the administration's proposal are gas from cows and rice paddies. One might prefer eliminating cows and eating potatoes to enacting the administration's current, equally witless, proposal.
NICOLE V. CRAIN is assistant professor of economics at the Harry F. Byrd, Jr. School of Business at Shenandoah University in Winchester.
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