December 1, 2023

WASHINGTON – Democratic lawmakers will release a plan Monday to raise up to $ 16 billion annually by levying a tax on imports from China and other countries that don’t significantly reduce the global warming pollution they cause.

The tax would be levied regardless of whether Congress passed new laws to reduce emissions from the United States. It would be roughly equivalent to the cost of US corporations under state and federal environmental regulations.

Experts said a border carbon tax could almost certainly provoke America’s trading partners and create serious diplomatic challenges ahead of the United Nations climate talks in Glasgow in November.

But Delaware Senator Chris Coons and California Representative Scott Peters, Democrats planning to announce the plan on Monday, said American companies deserved protection as the Biden administration pushed forward aggressive measures to reduce greenhouse gas emissions from fossil fuel burning have.

“We need to ensure that US workers and manufacturers are not left behind and that we have tools in place to assess global progress on climate commitments,” Coons said.

The plan comes a week after the European Union proposed its own carbon border tax on imports from countries with lax environmental controls.

The Democratic proposal, which Senate officials said was developed with input from the Treasury Department, the Office of the U.S. Trade Commissioner, and other parts of the Biden administration, is expected to win with a budget resolution of $ 3.5 trillion. Dollar connected.

The White House did not respond to a request for comment on the law or said whether the government would approve it. However, President Biden and government officials have said they support a carbon border tax as a tool to help meet climate goals.

The Democrats hope to pass their budget package later this year and use it as an opportunity to expand social, educational and health programs as well as fund a transition to a clean energy transition and cut greenhouse gas emissions. The decision to bundle the proposals into a budget vote law would allow the Democrats in the sharply divided Congress to pass the measure without a Republican vote.

A handful of Republican lawmakers have been investigating a carbon border tariff to counter China and protect US industry.

But Wyoming Senator John Barrasso, the top Republican on the Senate Energy and Natural Resources Committee, called the $ 3.5 trillion blueprint a “freight train to socialism,” and said the Democrats’ plan for a border tariff would spark a trade war.

“They are proposing a border tax because they know that criminal regulations and taxes will drive US companies overseas,” Barrasso said in a statement. He said the United States should instead work to make energy “cleaner and more affordable”.

Mr Barrasso’s state is a major producer of coal, natural gas and crude oil, the combustion of which creates the carbon emissions that scientists say are driving climate change.

A marginal tax is typically designed to offset the burden on a country that has imposed a tax or price on carbon emissions. Overseas companies that want to sell iron, steel, aluminum or other raw materials to the United States would have to pay a price for every ton of carbon dioxide they emit in the manufacture of their products, which would destroy any competitive advantage. The hope is that it will encourage other countries to also price CO2 and reduce emissions.

It’s also seen as a way to prevent American companies whose manufacturing processes emit large amounts of carbon pollution from migrating to countries with looser environmental regulations, a phenomenon known as leakage.

According to the Democrats’ proposal, a tariff would apply to about 12 percent of imports into the United States from 2024. It would include petroleum, natural gas, and coal, as well as products with a large carbon footprint such as aluminum, steel, iron, and cement. The list of goods covered could be expanded as the United States improves its methods of calculating the CO2 intensity of various products.

It’s estimated to raise between $ 5 billion and $ 16 billion annually, advisers to lawmakers said.

A carbon border tax threatens to make items made from imported products – from medical devices to automobiles to home appliances – more expensive for American consumers if foreign companies raise their prices, said David Weisbach, a professor at the University of Chicago Law School and an expert for CO2 border tariffs. Senate advisors argued that the legislation aims to avoid price increases in goods by initially taxing limited items.

Coons said he intends the tariff to act as a “complement” to the new climate policies that the Democrats intend to enact in the budget package, such as a mandate to get up to 80 percent of US electricity from low or zero tariffs. Carbon energy sources.

“We have a historic opportunity to show that climate policy goes hand-in-hand with providing economic opportunity as US innovators develop and scale clean energy technologies,” he said.

Mr Biden has pledged to cut US emissions roughly in half by 2030 and achieve net-zero emissions by 2050. However, the United States does not tax industry on the carbon it produces. Political analysts think it is unlikely that Congress will pass a carbon tax on domestic manufacturers and utilities in the near future.

Instead, the plan requires federal agencies to calculate the environmental cost of complying with “state, state, provincial, or local laws, regulations, guidelines, or programs” to reduce emissions.

That could refer to things like the regional cap-and-trade systems that 13 states have put in place; Specifying renewable fuel or electricity standards that promote clean energy use or even the burden of federal compliance under the Clean Air Act.

“I’ve never seen a limit adjustment that offsets regulatory costs,” said Weisbach. “This is going to be hard to do.”

Another complication is that while the poorest countries would be exempt from paying duties, it would be up to the US authorities to decide whether trading partners enforce climate change laws “at least as ambitious as federal laws and regulations “To reduce CO2 emissions.

As part of the Paris Agreement of 2015, the almost 200 participating nations agreed to reduce emissions – but in different ways. Some, like the United States and the European Union, have vowed to reduce emissions in their economies. Others, like Saudi Arabia, said they would reduce the expected growth in future emissions. China promised peak emissions “around” 2030. India said it would reduce greenhouse gas intensity per unit of gross domestic product produced.

“There will be different views on how you do this,” said Michael Mehling, associate director of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology, who was consulted by Mr. Coons’ staff on the proposal.

But he said, “It’s really good that you are doing this. I think this conversation needs to start over leaks. There is no way we can deal with this topic. “