International Competitiveness and Corporate Strategy Issues in EU ...

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Oct 28, 2013 (3 years and 5 months ago)

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International Competitiveness

and Corporate Strategy Issues

in EU and US Climate Change Policymaking


Tom Brewer


Presentation at the University of Oxford

Smith School of Enterprise
and the Environment


26 May 2009

Outline


1.
What’s the problem?

2.
How much of a problem is international
competitiveness, for whom?

3.
What have the EU and US been doing to
address it?

4.
What are the implications for …


the international climate and trade regimes


and corporate strategy?


Brewer
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International Competitiveness and
EU & US Climate Change Policymaking

2

What’s the problem?

International differences in carbon prices

Three set of overlapping issues



International competitiveness



GHG emission leakage



Free riders on multilateral agreement



Brewer
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International Competitiveness and
EU & US Climate Change Policymaking

3

How much of a problem is international
competitiveness, for whom?


Not

a macro
-
economic issue


There are issues for a few specific energy
-
intensive
and

trade
-
exposed industries


Steel


Aluminum


Cement


Pulp and paper


Glass and ceramics


Chemicals






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International Competitiveness and
EU & US Climate Change Policymaking

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Relative Size of Chinese Imports into US

(percentage of imports into US by value, 2007)

Source: Compiled from Houser et al. (2008: 43
-
44)


Brewer
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International Competitiveness and
EU & US Climate Change Policymaking

Industry

(imports/consumption)*

Canada (rank)

China (rank)

Steel (20%)

17.6 (1)

14.5 (2)

Cement (25%)

29.2 (1)

18.6 (2)

Paper (10%)

53.1 (1)

11.7 (2)

Aluminum

(60%)

55.7 (1)

5.9

(3)

* Approximate

(2005)

5

It is a
political

problem



In the US: Steel
-

China, China, China … and India
and Brazil and a few other countries


In France: cement (Lafarge)









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International Competitiveness and
EU & US Climate Change Policymaking

6

What has the EU been doing?

Considering ‘border adjustment measures’ (e.g. tariff)

and/or free allocations



European Parliament passed a resolution (2005/2049)
calling on Commission to ‘consider…’ adopting
BAMs

on
imports from non
-
Kyoto countries


i.e. US


Commission demurred: concerns about trade war with
US


Periodic French government and German industry
complaints


Commission climate directive (2008): review of
vulnerable industries criteria and data (2010) and
review of possible relief (2011)

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International Competitiveness and
EU & US Climate Change Policymaking

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What has the US been doing?

Inserting provisions in congressional bills for allowance
purchase requirements for importers

and/or rebates in vulnerable industries


Provisions in:

Senate Lieberman
-
Warner
-
Boxer and other bills (2008)

AEP
-
IBEW proposal

Supported by steel firms and unions;

opposed by US Foreign Trade Council


8

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International Competitiveness and
EU & US Climate Change Policymaking

8





Waxman Markey Bill (2009, H.R. 2454)




Brewer
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International Competitiveness and
EU & US Climate Change Policymaking

Free allocations

‘Primary’ products potentially covered: iron, steel,
aluminum
, cement, glass, pulp, paper, chemicals,
ceramics

Criteria for ‘eligible sectors’:


Energy intensity: energy costs at least 5%
-

and


Trade intensity: imports + exports at least 15%


Or
energy costs at least 20%

Start in 2012 and phase out by 2035

International Reserve Allowances


Not before 2025


Depending on President’s assessment of rebates

9

What are the implications for the international
climate and trade regimes?

Climate regime:

Unilateralism undermines multilateral cooperation

But threat of sanctions might enhance environmental
effectiveness of system and/or induce free riders to
take action to mitigate GHG emissions


Trade regime:

Add stresses to WTO, including dispute settlement process

Lead to trade war


Solution:
Multilateral discipline (?)


10

10

What are the implications for corporate strategy?

Varies across industry and country combinations:


Most industries are not directly affected


Some affected industries are already undergoing
international restructuring
-
relocation

Depends on ‘details’ of policies finally adopted:


tariffs versus allowance purchase requirements


when enter into force


how cost differences between domestic and imported
goods are determined


policies of exporting countries


e.g. China low
-
carbon
export zones



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International Competitiveness and
EU & US Climate Change Policymaking

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More implications for corporate strategy…

Strategic alternatives for firms/industries


Lobby for unilateral import protection


risks alienating
foreign governments (e.g. GE in China, US Foreign Trade
Council); WTO incompatibility?

Engage in outward foreign direct investment


risks
alienating home government

Support multilateral regime for ‘level playing field’

Support
sectoral

climate agreements

Become more efficient, less energy intensive


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International Competitiveness and
EU & US Climate Change Policymaking

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For more information…

Brainard
, ed.,
Climate Change, Trade and Competitiveness.
Brookings
Institution, 2009.

Carbon Trust, ‘The European Emissions Trading Scheme: Implications
for Industrial Competitiveness’, 2005.

Climate Policy
(several articles in various issues)

Droege

et al., ‘Carbon Leakage in a World of Unequal Carbon Prices’.
Climate Strategies, forthcoming.

Houser et al.,
Leveling

the Carbon Playing Field: International
Competition and US Climate Policy Design.
Peterson Institute for
International Economics and World Resources Institute, 2008.

Hufbauer
,
Charnovitz
, Kim,
Global Warming and the World Trade
System.

Peterson Institute for International Economics, 2009.

Van
Asselt
, Brewer and
Mehling
, ‘Addressing Leakage and
Competitiveness in US Climate Policy’. Climate Strategies, 2009

World Bank,
International Trade and Climate Change
. 2008.

http://www.usclimatechange.com



http://www.climatestrategies.org







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International Competitiveness and
EU & US Climate Change Policymaking

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