This madness is illustrated by the fact that China, with a GDP less than a half that of either the European Union or U.S., emits more CO2 than either economy.
Every year, Chinese emissions growth adds another country the size of Japan. It is hard to imagine that one year of China's growth, which comes to about $600 billion, could replace the emissions of Japan's $5 trillion economy. Yet, that is the kind of economic accounting cap-and-trade requires.
Moreover, government allocations of limited carbon use permits among businesses would create a new sandbox for Washington dealmakers, exacerbating the economic damage, and the opportunity for New York to establish a national trading platform -- yet another occasion for Wall Street to create synthetic securities and expand gambling that distorts economic decision making and hampers growth.
Having failed to persuade Congress to implement European-style regime, President Obama has embraced policies that are reducing U.S. CO2 emissions about 2% each year. These include higher mileage standards for cars and moving electric utilities from coal and oil to natural gas.
If Obama and Congress choose to go further, they should embrace policies that encourage participation and sacrifice by all nations, and strengthen, not weaken the U.S. economy.
For example, the U.S. should require that foreign products sold in the U.S. meet the same emission standards as those made here. This would require that developing countries like China not exploit the cost advantages from dirty production methods, and these requirements could be crafted to meet World Trade Organization requirements by treating domestic and foreign producers equally. That would reduce U.S. CO2 emissions without encouraging U.S. energy-intensive industries to migrate to China and other developing countries where they make the problem worse not better.
Further, many heavy industries like petrochemicals and primary metals are energy intensive, and the recent bounty of U.S. natural gas offers domestic producers new cost advantages to win export markets.
Currently, the U. S. Department of Energy is considering proposals to boost exports of liquefied natural gas -- a costly and environmentally dangerous process -- that generates fewer jobs and less growth than keeping the natural gas in the U.S. for use by energy intensive industries. Given the cleaner production methods applied in the U.S. than in developing countries, reserving natural gas for domestic industrial use would positively affect the global environment.