INTERVIEW-U.S. steel firms eye China fix in climate bill

.S. legislation to fight global warming by reducing greenhouse gas emissions should include protections to keep U.S. steel industry jobs from moving to China and other developing countries, a top U.S. steel industry official said.

"There's going to be a lot of steel demand in this new green economy and it ought to be made here, which is the most efficient and the most environmentally-protected place in the world to make the steel," Tom Gibson, president of the American Iron and Steel Institute, told Reuters.

The push to pass U.S. climate change legislation comes as countries are aiming to reach an international agreement to reduce greenhouse gas emissions by the end of the year.

Leading developing countries such as India and China are reluctant to agree to early emission cuts to solve a problem they say was created by the developed world.

That has created worries that jobs in energy-intensive sectors such as steel, aluminum, cement and paper could move from the United States and other rich countries that will face strict emission caps to developing countries that do not.

There has already been a migration of steel and other heavy industry jobs to China from the United States and Europe as that country has ramped up production and exports over the past decade. U.S. steel companies complain Chinese government subsidies keep many older, less-efficient and more-polluting steel mills in operation.

The Asian manufacturing giant produces about 40 percent of the world's steel and about 50 percent of the world's cement, although a large share of that output is consumed at home.

President Barack Obama has proposed a cap-and-trade system to curb emissions in the United States.

It would restrict carbon emissions from U.S. power plants, oil refineries and other industrial sites, then auction permits to exceed those limits. Plants that lower their emissions could sell the permits to other facilities that pollute more.

Congress could address the U.S. steel industry's concerns by giving it free allowances, or pollution permits, until China or India adopt comparable measures.

Another option would be to tax imports from countries based on the estimated carbon content of the product.

"I wouldn't call (such assistance) a subsidy. I would just call it a means to level the playing field against economies that aren't going to undertake a similar burden," Gibson said.

"If we're forced into (a cap-and-trade system), which we think may be ill-fitting for this industry, then you're going to somehow make the industry whole for both its direct and indirect emissions because we are an energy-intensive industry and we are exposed to international competition," he said.

U.S. steel companies have improved their energy efficiency by 33 percent since 1990 and can't make a lot of additional gains with existing technology, he said.

Critics complain free permits would reduce the steel industry's incentive to find further emission cuts and could give them windfall profits from permit sales.

The U.S. industry's preferred solution would be for the United States, China and other countries to negotiate a steel sectoral agreement to curb emissions, Gibson said.

"Theoretically, it would impose the same burden on all the parties and you don't have to worry about a border adjustment. That's probably the best feature of it," Gibson said.

China has recently "shown openness to discuss to taking on obligations in these negotiations, which is something new and very encouraging," Gibson said.

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