Obama Offers $33 Billion per Year in Climate Reparations

As the U.N. Climate Control Conference comes to an end today, many issues remain to be negotiated, including the size of the emissions cuts and the future of the Kyoto treaty. But one issue has already been settled: the size of the reparations that the developed countries (United States, Europe, Japan, etc.) must pay the developing countries (China, India, Africa, etc.) if the agreement is settled. 

The total reparations would be $30 billion per year in 2012, rising to $100 billion per year in 2020. Secretary of State Hillary Clinton told reporters yesterday that the United States would pay $10 billion of the $30 billion per year by 2012. Thus, the U.S. share of the $100 billion by 2020 would be $33 billion per year.

President Obama's huge expansion of the government debt has already brought the U.S. treasury close to bankruptcy, and he is aware of the danger. ABC News reported on Wednesday:

President Obama told ABC News' Charles Gibson in an interview that if Congress does not pass health care legislation that will bring down costs, the federal government "will go bankrupt."

But there are even worse dangers in the agreement currently being negotiated. The broad outline is that the developed countries would agree to emissions cuts from 1990 levels ("emission reduction objectives") while the developing countries would agree to increase their carbon emissions, though at a reduced rate ("substantial deviation in emissions").

The predictable result of this difference is that energy costs in the developed countries would skyrocket relative to energy costs in the developing countries. The only way that developed countries could keep their energy-requiring industries competitive would be by imposing border adjustments (tariffs and export subsidies) to equalize energy costs.

Meanwhile, China is insisting that the Copenhagen agreement prohibits border adjustments by the developed countries. According to a report on Wednesday from Bloomberg.com:
In Copenhagen, the latest version of a proposed treaty includes language banning developed countries from ‘‘resorting'' to climate-related trade measures is printed in brackets, meaning it lacks consensus agreement and must be dealt with by higher-level negotiators from 193 countries.

This particular issue is key to the future of the United States economy. Without border adjustments (both tariffs and export subsidies), American industry would become less and less competitive under the Copenhagen agreement. The U.S. trade balance would continue to deteriorate, and an eventual dollar crash would impoverish the American people and force an American retreat from the world stage.

On the other hand, this issue is also key to the future of the Communist government of China. If border adjustments are prohibited, then western democracies would prove by their deteriorating economies that they are unable to elect competent leadership. The threat of a Chinese democratic revolution would recede.

It is clear that the agreement currently being negotiated in Copenhagen could be a disaster for the American economy. The reparations could force our government into a high interest rate and high-inflation bankruptcy. Alternatively, the high cost of energy without border adjustments could cause the loss of energy-requiring industries, leading to a high interest rate and a high-inflation dollar crash. In either case, we could be heading toward an economic disaster.

Fortunately, there is still a chance that no agreement will emerge at the end of today's negotiations. Many thorny issues remain to be debated. Even if an agreement emerges, there is a strong chance that Congress will reject any agreement that would destroy America's economic future.

But President Obama is already planning on how he will get congressional approval. He does not have the two-thirds vote in the Senate needed to ratify a climate "treaty," so he will not call this agreement a "treaty." Instead, he will threaten draconian regulation of carbon dioxide by his EPA under the "Clean Air Act" in order to force Congress to enact this treaty's provisions.

The authors maintain a blog at tradeandtaxes.blogspot.com and co-authored the 2008 book, Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits and Faulty Tax System Before it's Too Late, published by Ideal Taxes Association.