How America Wins from a Pro-Climate Trade Policy

The Hill

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A new, first-of-its-kind study by the MacronDyn Group and commissioned by our group, the Climate Leadership Council, reveals that the U.S. economy is three times more carbon efficient than that of China and nearly four times that of India. It also compares favorably to the economies of Canada, Mexico, Korea and Japan. Of the world’s major economies, only those of the European Union are as efficient. Yet U.S. manufacturers are currently failing to reap the full benefit of their cleaner operations. With such a large “carbon advantage,” these businesses would only gain from a policy that makes less efficient foreign competition play on a level field.

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Amid a pandemic downturn, the carbon dividends solution also offers striking benefits for American workers and the economy. If a gradually rising and economy-wide carbon fee starting at $43 per ton of carbon emissions were enacted next year, as the carbon dividends plan calls for, $1.4 trillion in new capital investment would be unlocked by 2035, a recent study by the research firm Thunder Said Energy found. This investment surge would drive the creation of 1.6 million new jobs while slashing U.S. emissions by more than half over that same period.

Rising carbon prices would also help America seize back control of its manufacturing and energy supply chains by prompting production based overseas to return to the U.S., closer to the products’ point of use, according to the study. And with more efficient technologies on hand, domestic manufacturers would double their efficiency gains, making them even more competitive in global markets.

Finally, a carbon fee and border carbon adjustment could be done unilaterally, without drawn-out international negotiations. Faced with this system, other countries would have little choice but to follow suit or lose a share of the U.S. market. And as more countries follow America’s lead, even rival economies, like China, would come under pressure to adjust their policies. In short, it would be an effective counter to China’s strategy of dominating world manufacturing while remaining the world’s biggest polluter.

With this approach, America can achieve in one sweep what decades of climate talks have never accomplished. On the other hand, if America fails to act, it must consider the real risk that other major economies will move first to leverage rules to their advantage.

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