“What did Trump do? When you had unfair trade practices that gave the other country an advantage over our companies, they imposed a tariff on their product,” the senator said. Lindsey Graham (RS.C.), who has engaged with Democrats on the issue, told POLITICO. “Well, we’re trying to move the world to a cleaner environment, and China, India, and other countries aren’t doing the same, and they have to pay the price.”
In this case, lawmakers are taking a fresh look at the so-called carbon border adjustment fee, which would be added to products from foreign companies whose carbon emissions are higher than those of their American competitors. These products are often cheaper to make overseas due to weak pollution regulations, giving them an economic advantage over U.S. manufacturers of more climate-friendly products, such as steel.
U.S. policymakers have considered carbon adjustments for more than a decade, but the policy is gaining traction as Washington grapples with issues that have risen to prominence under Trump, such as reinvigorating U.S. industry and competition with China.
It also takes on new urgency as the European Union prepares to implement its own Carbon Border Adjustment Mechanism, known as CBAM, which would apply to imports from countries without policies. aggressive emission reduction initiatives. Those countries could include the United States, where the Biden administration is struggling to pass climate legislation.
Democrats acknowledge that the policy under discussion has similarities to actions taken by the Trump administration, but with a few key differences.
“It’s a lot like Trump’s tariffs on China, [except World Trade Organization] consistent and in a way that does not alienate us from our allies,” the senator said. Chris Coon (D-Del.) told POLITICO. “It’s a win for everyone. Recognizing that we need new and more powerful tools in our global competition that will bring us closer to our allies and disadvantage some of our adversaries is a common view of a spectrum of Republicans and Democrats.
Coons and Rep. Scott Peters (D-California) introduced legislation, S.2378 and HR 4534in July to establish a carbon border adjustment on polluting imports that covered steel, aluminum and cement, as well as natural gas, oil and coal.
The duo touted the plan as a way to generate revenue for Democrats’ sweeping social and climate spending agenda, and as a tool to protect U.S. industries exposed to domestic climate rules while urging foreign polluters such as China to step up their emissions reduction efforts.
The bill was not included in the House-passed version of Democrats’ Build Back Better Act, HR 5376, which has since stalled in the Senate. But Coons’ proposal has sparked bipartisan discussions backed by a broad coalition of outside groups — including representatives from labor, trade and environmental organizations — that are exploring how the United States could craft a border carbon adjustment that could be enacted. by Congress.
“This is where climate, trade and manufacturing meet, where we could make bipartisan progress to protect American jobs as we decarbonize,” said Brad Markell, executive director of the climate change task force. energy of the AFL-CIO.
Sen. Kevin Cramer (RN.D), who met with Graham last week to discuss the idea and wants to talk to Coons about his bill, said the biggest challenge will be reconciling the different motivations that bring Democrats, Republicans and interest groups at the table.
In an attempt to build support from the right, Cramer reached out to former Trump administration officials who support the policy, and pointed to the geopolitical and economic benefits of imposing a carbon border adjustment.
“What we’re working on is an American climate policy first. Donald Trump should love it. He’s brought the Republican Party to a tariff position that we’ve never been comfortable with before,” Cramer said. at POLITICO.
Cramer co-wrote an editorial in December, former Trump national security adviser HR McMaster called on the US and EU to impose a carbon tax on imported goods as part of a “transatlantic initiative on climate and trade” that would apply to exports of dirtier Russian natural gas.
“I always thought it was an opportunity as part of a national security strategy, because the issue of climate change is obviously linked to a series of other challenges, such as energy security, the security of the water and food security,” McMaster said in an interview.
Cramer said he shared the op-ed with other former Trump officials, including Energy Secretary Dan Brouillette and Secretary of State Mike Pompeo.
Robert Lighthizer, Trump’s former trade adviser, is also interested in the subject, according to his former deputy, Dennis Shea. He said he and Lighthizer submitted a proposal to the WTO in the final days of the Trump administration to allow members to “offset” products made in countries with poor environmental standards, a similar proposal. concept to a carbon border adjustment.
“If there is a country that maintains very low environmental standards and therefore its exports are cheaper than similar products here in the United States, and it uses that as a competitive advantage internationally, many people from all political backgrounds would find that problematic,” said Shea, who is now at the Bipartisan Policy Center.
But one area where Democrats and Republicans diverge on the issue is the desire of climate advocates to tie any tariff or levy on imported goods to a corresponding domestic carbon price. Many Democrats — and free marketers — have said for years that such a measure could be an economically efficient way to help reduce carbon emissions.
Graham is an exception among Republicans on the issue, but Cramer said most Republicans aren’t considering a domestic carbon tax.
“When you talk about a carbon price, you start raising red flags,” Cramer said.
For Democrats, however, the trade element and the domestic carbon price go hand in hand.
“It’s great that they [Republicans] are interested in talking about a carbon border adjustment,” the senator said. Sheldon White House (DR.I.) told POLITICO. “The downside is that it doesn’t work without a denominator, and the prospective denominator is a carbon price. They will not talk about a price on carbon.
Many economists and trade experts say it would be difficult to get the WTO to approve a carbon border tax for a country that wants to penalize imported goods based on their carbon content without taxing its own products. This would raise equity issues as well as accounting challenges.
“My reading of international trade law and what makes sense for the United States is that if we were to actually move forward with border carbon adjustment in law, you would want it and you would need it. let it be anchored in the policy that the United States was putting in place,” said Nat Keohane, an economist and president of C2ES, a nonprofit representing businesses that support climate action.
Given the politically slim chance that Congress would take such a step, although, Democrats and some environmental groups are exploring ways to design a carbon import levy without an additional domestic tax.
Coons’ bill from last year would apply the tax whether or not Congress passed new laws to reduce emissions. Instead, it would be designed to match the costs that American businesses already face from a hodgepodge of state and federal environmental regulations and policies.
The Sierra Club is circulating a memo arguing that a domestic carbon price is not a precondition for import fees at the border.
Instead, the environmental group argues that policymakers could impose a levy based on the additional carbon that goes into a given imported good, like steel, compared to the carbon that would have been produced in the United States to make this well, a concept known as “embodied” carbon.
“We directly target the actual degree of additional carbon that went into that ton of steel or concrete instead of associating it with an indirect proxy such as a carbon price,” said Ben Beachy, program director of living economy of the Sierra Club.
Without a carbon tax, Democrats and environmental groups say the United States would still have to continually strengthen its national emissions policies in one form or another, whether through investment or regulation, in order to equitably impose an import tax on countries that do not pursue aggressive climate action. – and avoid being hit with similar levies by other governments. The European Union and Canada, for example, already have national carbon pricing systems in place, and both could impose border carbon adjustments for products from countries that do not impose sufficient costs on pollution.
Republicans, however, have more modest ambitions, arguing that the United States does not need to strengthen its own policies to carry out import levies. That’s because America’s industrial sector is already less carbon-intensive than virtually any other country.
Making an average ton of steel in China, for example, generates more than twice the carbon emissions of the United States.
George David Banks, Trump’s former international climate adviser, told POLITICO that the first step is for Congress to help define a methodology to measure and compare emissions from produced goods. in various countries, an ill-defined domain.
“What we’re talking about is creating an international marketplace that recognizes the efficiency of the U.S. economy relative to others,” said Banks, a fellow at the Bipartisan Policy Center, which advises GOP lawmakers on carbon adjustments. at the borders. “The goal is to create a carbon club that has the leverage of the market to reduce global emissions.”
