Under the House bill, which still needs to pass the Senate, a U.S. cap-and-trade scheme would start in 2012 and the most trade-sensitive sectors would be given emission allowance rebates to cover the costs of complying with the carbon trade scheme. Those rebates will last till about 2025.
By mid-2022, the president must decide how to tackle competitive concerns after 2025 and would examine whether competitor nations have agreed to emissions reduction targets, energy intensity targets or steps such as sectoral caps or export tariffs that place a price on carbon.
The idea is to give China, India and other major developing nations time to enact climate-friendly measures.
"I think generally they're using this as a means to pressure developing countries to take stronger action on emissions," said Zhang Haibin, a professor of environmental politics at Peking University and an advisor to the Ministry of Commerce on trade and climate change policies. "But if the United States takes unilateral action without proper multilateral consultations and agreement that could spark big trade disputes, a trade war even," he said.
That kind of clash comes at a sensitive time in the world's battle to slow climate change, with December's meeting in Copenhagen seen as pivotal.
"This is completely unacceptable. It will completely derail the Copenhagen process, which is already at a complicated stage and completely gridlocked right now," said Sunita Narain, head of the New Delhi-based Centre for Science and Environment.
But some experts say the risk of such measures is small, given the logistical complexities involved.
"If you look at real life, how is it going to be implemented? That's going to be a very complicated matter. I'm not sure people have thought clearly, technically, how to make this happen," said Changhua Wu, director for Greater China of the Climate Group, a nongovernmental organization that helps governments and companies reduce carbon emissions.
"In the meantime, there are other stakeholders in the U.S., big companies that operate in China and India. They have their opinions as well. So it's going to be a very complicated picture," she added.
Ultimately, the measures could accelerate the development of domestic carbon exchanges in emerging countries, which thus far have sold most of their carbon abatement tariffs internationally.
"If the Senate approved similar legislation before December, the likelihood of domestic carbon pricing being introduced in Asia potentially increases," said Simon Smiles, Asian thematic analyst for UBS in Hong Kong, who has studied the cost impact of domestic emissions trading and carbon tariffs on Asia firms.
"I continue to see the political expediency of carbon-related import duties. But as the legislation currently stands, the near-term risk of border adjustments based on the amount of carbon in goods imported into the U.S. appears very low."
