Don't Provoke a Cap-and-Trade War

Last week, Energy Secretary Steven Chu said the U.S. should be open to slapping tariffs on imports from countries that fail to implement their own carbon reduction policies. Meanwhile, China has threatened trade war if faced with carbon duties, which it says are illegal under World Trade Organization agreements.
Trade restrictions tend to leave all involved poor, making trade war a frightening prospect during an already immiserating recession. So how did we come to have the Energy Secretary provoking threats of mutually destructive trade sanctions?
Here's how. Either all the big, carbon-intensive economies reduce their emissions, or there's little chance of reducing warming. If the climate modelers are right, we'll all be better off if everyone pitches in. But each has an incentive to hold out, since countries that don't pitch in will enjoy lower energy costs and a competitive advantage in international markets. (read the rest of the story at Don't Provoke a Cap-and-Trade War on www.cato.org)