Addressing Competitiveness Issues in Climate Legislation

Energy-intensive industries may face certain competitiveness concerns resulting from a program to reduce U.S. greenhouse gas (GHG) emissions. Industries such as aluminum, cement, iron and steel, pulp, paper, and certain chemicals — as large energy users — all have high energy costs and sell their products in a global marketplace. Domestic producers of these goods could face higher costs than their competitors in countries without comparable GHG constraints. The American Clean Energy Security (ACES) Act, which recently passed the U.S. House of Representatives, attempts to address these competitiveness concerns by compensating energy-intensive, trade-exposed firms for higher costs by providing them with free allowances and through the use of border tax adjustments.