GREEN MISSION: U.S. Energy Secretary Steven Chu (front) tries to promote China to play a leading role in developing clean energy during his four-day trip to China. Chu visited ENN Group, a Hebei-based clean energy company, on July 17 (CFP)

During their high-profile visits to China, U.S. Energy Secretary Steven Chu and Commerce Secretary Gary Locke tried to convince China that the United States was not turning the fight against climate change into a tool for protectionists by imposing carbon tariffs on imports.

The United States, Canada and the EU have created proposals to "level the playing field" by using carbon tariffs—duties imposed on imports from countries having less control on greenhouse gas emissions. The U.S. House of Representatives on June 26 passed a bill including the use of carbon tariffs, sparking concerns in China, India and other developing countries that developed nations are wielding a new weapon of trade protectionism.

Such proposals would "license developed countries to resort to trade protectionism in the name of protecting the environment," and "seriously hurt the interests of developing countries and trigger disputes in international trade," said Yao Jian, spokesman for China's Ministry of Commerce, on July 3.

As a response, Chu said during an interview with Xinhua News Agency that the bill was "not designed to establish trade barriers, but to encourage green economies in other states."

Analysts believe whether China, as the largest developing country, and the United States, as the biggest industrialized one, can reach a common stance on cutting greenhouse gas emissions will be crucial to the UN climate conference in Copenhagen in December.

"Both countries recognize that fighting climate change is a long journey and now it is just the beginning of the long journey," Chu said.

While Chinese officials opposed the practice of incorporating emission reduction standards into tariffs and strove to win more time for Chinese manufacturers to adapt to a low-carbon future, industrial associations and manufacturers are assessing the impact and have considered adopting carbon-related green incentives.

Green protectionism

Former French President Jacques Chirac first proposed carbon tariffs as a way to raise the duties on imports from countries that are not making the same effort to cut greenhouse gas emissions as their international peers. The concept has been echoed by the United States, Canada and the EU to avoid further losses of competitiveness in domestic energy-intensive industries.

After taking office, U.S. President Barack Obama promised a leading U.S. role on climate change. The U.S. House of Representatives on June 26 passed the American Clean Energy and Security Act of 2009 for clean energy development, which aims to cut carbon emissions by 17 percent from their 2005 levels by 2020 while boosting reliance on renewable sources of energy.

The goal, though welcome, represents only a 4-percent reduction using the base year of 1990 for comparison. The Kyoto Protocol of 1997 requires all developed countries to reduce emissions of six greenhouse gases by 5.2 percent by 2010, taking 1990 as the base year. But Obama's predecessor, former U.S. President George W. Bush, refused to ratify the protocol and failed to commit the world's biggest polluter to emission reduction targets during his presidency.

The new act also included a provision of "carbon equalization," or using carbon tariffs to protect paper, cement, steel and other energy-intensive industries that expect to face a steep rise in production costs under a federal emission cap from foreign competitors as of 2025.

But as legislators focus more on competitiveness than climate change, analysts caution that it could lead to retaliatory action and a global trade war, undercutting the country's attempts to sell low-carbon technologies abroad.

China opposed the attempt to bring trade and competitiveness into environmental negotiations one week after the act was passed.

The use of carbon tariffs would breach guidelines of the World Trade Organization and go against the spirit of the Kyoto Protocol of 1997, Yao said.

China, India and other developing countries emphasize the principle of "common but differentiated responsibilities" among nations in addressing climate change under the protocol. Under the principle, developed countries are required to shoulder the largest share of emission reduction responsibilities, and finance and supply related technologies to other countries.

The United Nations Framework Convention on Climate Change is scheduled to meet in Copenhagen in December, where a new pact is expected to succeed the Kyoto Protocol that will end in 2010.

Universal standards

A carbon tariff is detrimental to the global economy because it increases trade barriers based on different conceptions of how much carbon countries should be allowed to produce.

"Carbon tariffs will not be effective without an international agreement on the distribution of global carbon emission allowances," wrote Rachel Brewster, an assistant professor at Harvard Law School, in an article for the online edition of The Christian Science Monitor. "It's the key issue in establishing what is fair in international trade as well as addressing climate-change issues globally."

Different from the practices in the United States which required countries to reduce emissions based on their current share of greenhouse gas emissions, China currently adopts two standards, per-capita energy consumption and per-capita greenhouse gas emissions to decide the responsibilities in emission reduction.

China's per-capita emission is much lower than developed countries, although China and the United States are the two largest greenhouse gas emitters.

GREEN MOTORS: General Motors promotes its quest to become "green" in China (CFP)

The United States has less than 5 percent of the world's population but emits 25 percent of the world's total greenhouse gas, while China's per-capita emissions were roughly a quarter of the U.S. level, according to Chu. Chu also acknowledged that China had more stringent automotive fuel economy standards than the United States during his Beijing trip.

China's emissions come largely from its production of steel, cement, aluminum, paper and chemicals. At present, exports account for 35 percent of China's carbon dioxide emissions and exports to American consumers alone account for 7 to 14 percent of China's carbon emissions. In contrast, U.S. emissions come mainly from domestic consumption, such as fuels to heat and cool buildings and to power vehicles.

"It's unfair that developed countries impose carbon tariffs on final goods produced in China as the world's workshop," Wang Xi, a professor of environment and resource law with Shanghai Jiaotong University, told Economic Information Daily. "Not only the polluters but also consumers should pay for the costs, because a large share of emissions in China is attributed to international trade and investment, and pollution-intensive industries transferred from developed countries to here."

While addressing the American Chamber of Commerce on July 17 in Shanghai, Locke delivered a message: Americans should pay for the greenhouse gas emissions associated with the manufacturing and transport of products that they consume—no matter where they are made.

"if it's our own consumption activity that's causing the emission of greenhouse gases, then quite frankly Americans need to pay for that," he said.

Low-carbon choice

China has not put in place a national carbon tax and is unlikely to have one before the Copenhagen climate conference in December, though research work in this aspect began in May to better prepare China for a low-carbon future.

When a carbon tariff is imposed on imports from countries without a national carbon tax, it will equal a national carbon tax levied only on export-oriented manufacturers, allowing domestic-oriented manufacturers to gain cost competitiveness against them, said Luo Jun, Secretary General of the Asian Manufacturing Association.

"China's export-reliant economy is vulnerable to moves such as a carbon tariff, which could raise the costs of its exports," Luo said.

China's manufacturing industry, which barely existed three decades ago, is less technology-intensive compared with its international competitors. If the bill is passed in the United States, it will put higher requirements on China's export-oriented manufacturers.

According to data from the Ministry of Commerce, China exported goods worth $252 billion, or 17.7 percent of its total exports, to the United States, its largest single-country market last year.

Carbon-intensive industries including machinery and electronics, construction materials, steel and chemicals produce more than half of China's exports. Machinery and electronics products, for example, accounted for approximately 60.6 percent of China's exports to the United States last year.

If the EU considers a similar tariff, it would make the situation even worse—exports to EU markets accounted for 20.5 percent of China's total exports last year.

A national carbon tax will further erode China's cost advantages, but without it, China will find it hard for the country to tone in with the international community.

"The global market begins to favor low-carbon products and show respect to producers of green products now," Luo said. "That's why we have to urge manufacturers to implement their own strategies of energy conservation and emission reduction."

An inevitable carbon tax will lead to a reshuffling in energy-intensive industries such as steel and iron, chemicals and construction materials. "A majority of Chinese manufacturers will face stern challenges, and only a few in the business niches of new and clean energy may benefit from the global low-carbon rush," he said.

Multinationals including General Motors Co., TPV Technology Group and Otis Elevator Co. have led China's green endeavors. TPV Group streamlined its production capabilities with eco-friendly, energy-efficient technologies; Otis Elevator produces green elevators while General Motors promotes its quest to become "green" motors.

The manufacturing world will have a new standard to assess enterprises' performance, said Xiong Yan, an observer of low-carbon policies and Chairman of China Beijing Environment Exchange, suggesting low-carbon emission will be part of enterprises' core competitiveness and the game changer in the future.

"Enterprises could close down overnight due to excessive carbon emissions," Xiong cautioned.