Senate Staffer: Political Window for Carbon Border Tax Could Come in 2025
A climate policy adviser to Sen. Sheldon Whitehouse, a Rhode Island Democrat and lead advocate for a domestic carbon tax paired with a carbon border tax, said he thinks the expiration of Trump tax credits in 2025 could create a window to pass some sort of carbon border adjustment tax, because Congress will be seeking revenue raisers to be able to continue the tax cuts.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Matt Bolden, who spoke at a Washington International Trade Association program on carbon border taxes Feb. 12, noted that the EU and the U.K. are moving toward taxing imports of goods in countries without a price on carbon -- no matter how green those goods may be. He said Congress faces a choice -- either to let the EU write the rules, or to make it so U.S. producers can be rewarded for the decarbonization efforts they have made in steel, cement, chemicals, fertilizer and other carbon-intensive sectors.
Bolden, who noted he was sharing his own, not necessarily Whitehouse's, views, said the stalled negotiations on the global arrangement on steel are evidence that the EU is not backing down on applying a carbon border adjustment mechanism (CBAM) to American exports in covered sectors. By including a carbon price, American exporters would not face the CBAM, as long as that price were considered as high as the European carbon tax (see 2312060068).
Christine Harbin, an energy staffer for Sen. Bill Cassidy, R-La., also was a panelist at the online session. Cassidy introduced a carbon border adjustment bill (see 2311030006) that doesn't include a domestic carbon tax, but Harbin said she thinks "there’s a striking amount of consensus positions that the political parties can agree on" in this subject area.
Harbin encouraged manufacturers in covered sectors to tell Congress it's a priority to help them invest in green production without being undercut by dirtier, cheaper imports. That's needed "to continue this momentum for a common sense trade policy that achieves all these energy security and manufacturing goals while reducing emissions," she said.
Panelist Catrina Rorke, executive director of the Center for Climate and Trade at the Climate Leadership Council, reminded listeners that 25% of carbon emissions are exported. "We will not address the climate crisis at the scale and speed required unless we take into account trade," she said.
She said that China's, India's and Russia's products have three to four times the carbon per dollar of value as American goods. She said a carbon border tax on steel could cut imports in half, and increase domestic steel producers' profit by about 40%.
Linda Dempsey, vice president, public affairs for CF Industries, a hydrogen, ammonia and fertilizer producer, said because her sector is both energy intensive and trade exposed, it needs import protection of this kind, so it can invest in new plants that have lower greenhouse gas emissions.
"The work that Sen. Whitehouse and Sen. Cassidy … are doing is absolutely vital to get the right policies moving forward," she said. "Both of their proposals would create strong incentives to reduce global emissions" and ensure that U.S. producers will lead that transition.
When asked by International Trade Today how policymakers could ensure that making domestic steel more expensive wouldn't lead steel-consuming manufacturers to set up outside the country, Rorke said the government will have to ask itself how to operationalize a border tax.
She asked rhetorically: Do you cover the weight of the metals in the car, or the washing machine? Do you consider the value of material inputs for chemicals? "There are going to have to be different systems for dealing with complex goods," she said.
Also, an ITT reporter noted there is already political pressure to roll back trade remedies on imported fertilizer, so would Congress be prepared to hike the price of imported fertilizer for the sake of climate and disappoint that powerful interest group?
Dempsey said there's a reason for trade remedies, and reminded listeners there is no tariff on imported fertilizer outside of trade remedies. "That being said, this issue of the impact on the downstream is a really important one, and we agree with that," she said. "It is important in the fertilizer world for our … farmers to continue to be globally competitive. It’s important to bring those industries early into the conversation."
Harbin added, "I think this really highlights some of the complexity of this issue, and the importance of getting the details right."