A new analysis from Sallie James, trade policy analyst at the Cato Institute’s Center for Trade Policy Studies illustrates more reasons to oppose the Waxman-Markey Cap and Trade Bill. Not only is it a productivity killing energy tax, it will also likely lead to tariffs, lobbying, and other corruption. 

James explains that in order to silence fears that a cap and trade system will make American companies less competitive with countries that do not have carbon limiting measures in place, tariffs will be levied against those countries. In his testimony to the House Science and Technology Committee, Energy Secretary Steven Chu said carbon tariffs are a way to “level the playing field.” Another method being discussed to help “level the playing field” is to give away up to 85 percent of the emission permits to politically connected industries.
These tariffs and free allowances are most likely illegal by World Trade Organizations (WTO) agreements.  The free allowances may constitute “actionable” subsidies under the WTO Agreement on Subsidies and Countervailing Measures. The carbon tariff may also violate Article I and Article III of the General Agreement on Tariffs and Trade. These actions will cause backlash from countries on which these tariffs are imposed resulting in tariffs against US made exports. Back home, companies and industries will fight for political favors leading to more lobbying and corruption. As James writes, “A bill that is over 1,400 pages long and filled with loopholes, exceptions and special favors for certain industries, is an invitation for lobbying and corruption.” She quotes the Financial Times saying the bill would “create a perpetual struggle for political advantage.”
Click here to read the full analysis.