Cap-and-Trade and the U.S. Economy

Canada is the United States' largest trade partner and largest supplier of oil. The two countries have had a free-trade agreement since 1989, but the relationship has weakened in recent years due to the war in Iraq and disputes over U.S. tariffs on Canadian lumber. This March, a controversial issue rose on the scene of U.S.-Canadian trade in the form of a U.S. House bill to cap greenhouse gas emissions.

The American Clean Energy and Security Act could mean tariffs on a range of Canadian imports and a hard hit for Canada's oilsands industry. This "cap-and-trade" bill is being championed by House Democrats led by Representative Henry Waxman (D-Calif.), who are trying to scrape together support to pass it by the year's end.

It would require U.S. companies to buy credits for the right to pollute, with the overall number of credits decreasing over time to encourage industries to rely more on alternative energy sources. It would also require refineries to reduce the carbon emissions to 14 percent below 2005 levels by 2020, then to 83 percent below 2005 levels by 2050.

This bill is currently being debated in the House Energy and Commerce Committee. It is a partisan and divisive issue, supported by many Democrats and President Barack Obama, but opposed by virtually all Republicans in the House.

The bill is causing waves abroad, too. Canadian officials are concerned these measures, and the potentially subsequent tariffs on Canadian imports, amount to barriers to trade for the Canadian oilsands industry, an industry that has recently come under fire from environmentalists who decry its high production of greenhouse gases and toxic byproducts. A government panel also said Canada may have to adopt a cap-and-trade policy of its own to avoid U.S. tariffs.

Although this climate change bill will hurt certain industries in the U.S. and Canada in the short run, it is a necessary policy and will be beneficial to the U.S.-Canadian trade relationship in the long run. This policy will lessen the U.S.'s dependence on volatile Middle Eastern oil and put the country on a sounder energy footing for the future. It will decrease the future costs (economic and social) of pollution and global warming.

By providing economic incentives for Canada to adopt similar measures, it will encourage these benefits in our northern neighbor, too. The incentives to develop a greener oilsands industry would mean a less environmentally harmful Canadian oil source for which it would be more politically acceptable for the U.S. to be a customer for the long term.

Thus, Congress should pass the climate change bill because it is necessary for the environmental and energy future of the U.S., but also because it will pressure trade partners such as Canada to adopt greener practices, too.

The main reason Congress should pass the climate change bill is that it will free the U.S. from dependence on Middle Eastern oil and put the country on a better energy footing for the future. By reducing the emissions of greenhouse gases by 80 percent in 40 years, this legislation would force industries to look at alternative energy sources that do not produce as much greenhouse gas.

The U.S. would invest $15 billion each year in alternative energy, a plan that President Obama says will create 5 million stable jobs that could not be outsourced. This would develop new green energy industries in the U.S., such as the wind and solar power industries, lessening the influence of shifts in international oil prices on the U.S. economy.