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Carbon Border Tax Is Proposed by Democrats

Carbon Border Tax Is Proposed by Democrats
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Carbon Border Tax Is Proposed by Democrats

Carbon Border Tax Is Proposed by Democrats

WASHINGTON – Democratic lawmakers on Monday proposed raising up to $ 16 billion a year by imposing a tax on imports from China and other countries that do not significantly reduce the pollution that warms the planet they produce.

The tax would be levied regardless of whether or not Congress passed new laws to reduce emissions created by the United States. It would be designed to be approximately equivalent to the costs incurred by US businesses under federal and state environmental regulations.

Experts said a carbon tax at the border would almost certainly provoke US trading partners and could create serious diplomatic problems ahead of the UN climate talks scheduled for November in Glasgow.

But Senator Chris Coons of Delaware and Representative Scott Peters of California, both Democrats, said U.S. companies deserve protection as the Biden administration moves forward with aggressive policies to reduce emissions from greenhouse gases caused by the combustion of fossil fuels.

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

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

The Democrats’ proposal, which Senate advisers say was developed with input from the Treasury Department, the Office of the U.S. Trade Representative and other parts of the Biden administration, is expected to be attached to a budget resolution from 3.5 trillion dollars.

Democrats hope to pass their budget package this year and use it as a way to expand social, education and health care programs, as well as fund a transition to clean energy and cut greenhouse gas emissions. tight. The decision to bundle the proposals into a budget reconciliation bill would allow Democrats in the heavily divided Congress to pass the measure without any Republican votes.

A handful of Republican lawmakers have explored a carbon tariff as a way to counter China and protect US industries.

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

“They are proposing a border tax because they know that punitive regulations and taxes will push American businesses overseas,” Barrasso said in a statement. He said the United States should instead focus on making energy “cleaner and more affordable.”

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

A border tax is usually designed to equalize the burden on a country that has imposed a tax or price on carbon dioxide emissions. Foreign companies wishing to sell iron, steel, aluminum or other raw materials in the United States would be required to pay a price for each tonne of carbon dioxide they emit during the manufacture of their products, which would erase any competitive advantage. The hope is that this will encourage other countries to also price carbon and reduce emissions.

It is also seen as a way to prevent US companies whose manufacturing processes emit large amounts of carbon pollution from relocating to countries with looser environmental rules, a phenomenon known as leakage.

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According to the Democratic proposal, a tariff starting in 2024 would apply to about 12% of imports entering the United States. It would cover petroleum, natural gas and coal as well as products that have a large carbon footprint such as aluminum, steel, iron and cement. The list of products covered could grow as the United States improves the methods of calculating the carbon intensity of different products.

It is estimated to raise between $ 5 billion and $ 16 billion a year, advisers to lawmakers said.

A carbon tax at the border threatens to make items made with imported goods – including medical devices, automobiles and appliances – more expensive for U.S. consumers if foreign companies increase their prices, said David Weisbach, professor at University of Chicago Law School and Expert. in carbon tariffs at borders. Senate advisers argued that the legislation is designed to avoid causing price hikes for products by initially taxing only limited items.

Mr Coons said he intended the tariff to act as a “complement” to the new climate policies Democrats intend to adopt in the budget package, such as a mandate requiring up to 80% of the American electricity comes from low or zero. sources of carbon energy.

“We have a historic opportunity to demonstrate 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 U.S. emissions by about half by 2030 and achieve net zero emissions by 2050. The United States, however, does not tax industries for carbon. they produce. Political analysts say Congress is unlikely to enact a carbon tax on manufacturers and domestic utilities in the near future.

Instead, the plan calls on federal agencies to calculate the environmental cost incurred to comply with “any federal, state, regional or local law, regulation, policy or program” designed to reduce emissions.

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It could refer to things like the regional cap-and-trade systems that 13 states have adopted; national standards for renewable fuels or electricity that encourage the use of clean energy; or even the burden of complying with federal regulations under the Clean Air Act.

“I have never seen a border adjustment that adjusts for regulatory costs,” Weisbach said. “It’s going to be difficult to do.”

Another complication is that even if poorer countries would be exempt from paying the tariff, it would be up to US agencies to determine whether trading partners are enforcing climate change laws “that are at least as ambitious as federal laws and regulations. To reduce carbon emissions.

Under the 2015 Paris Agreement, nearly 200 countries involved agreed to reduce their emissions, but in different ways. Some, like the United States and the European Union, are committed to reducing emissions in their economies. Others, like Saudi Arabia, have said they will reduce expected growth in future emissions. China has pledged to peak in emissions “around” 2030. India has said it will reduce greenhouse gas intensity per unit of gross domestic product produced.

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

But, he said, “It’s really good that they are doing that. I think this conversation needs to be started on the leaks. There is no way that we cannot deal with this topic.

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