Carbon Border Adjustment Bill Reintroduced in Congress

Imports of industrial goods that had a higher amount of carbon emissions than U.S. industry would owe a fee on the excess emissions of $60 a ton, and the standard would get more stringent over time. Domestic producers that were dirtier than average would also owe a fee.

In the case of domestic producers, exports of their goods would receive a rebate of the fees, if they were headed to a region with a carbon border adjustment. "To prevent domestic resource shuffling, where companies manipulate production to maximize rebates by selectively exporting from higher-emitting facilities, export rebates are calculated using firm-wide carbon intensity rather than facility-specific," a summary of the bill says.

The carbon intensity could be measured across an exporting country's sector, but data from specific firms could be considered "If the country of origin has trustworthy emissions data for the relevant industry and is a transparent market economy and there is no evidence of inter-firm resource shuffling (i.e., the purposeful regrouping of all lower-carbon facilities in a country under a single firm for purposes of exporting to the U.S.)"

Country of Origin would not be determined by country of last substantial transformation, but rather the country "where an energy- or emissions-intensive process transformed its inputs into the covered primary good."

Imports from least developed countries would be exempted, except for any goods where they control more than 3% of global export share.

The sponsors say, "The President may negotiate carbon clubs to drive down global greenhouse gas emissions and expand markets for low-carbon industrial goods. In exchange, countries may receive a reduction in foreign carbon intensity charges and first preference for the bill’s foreign assistance funding."

To be in such a club, the trading partner must have:

• "Domestic decarbonization policies that achieve greater emissions reductions than what is induced by foreign carbon tariffs or carbon border adjustments
• "Trade policies, like a carbon border adjustment, that give preference to imports of lower-carbon goods
• "Policies that address non-greenhouse gas pollution
• "Policies that prevent transshipment through their countries."

Whitehouse said in the release: "The carbon border adjustment is the world’s last lifeboat to climate safety, and other nations are moving fast: the EU’s carbon border adjustment mechanism begins in January, and the UK and Australia look poised to join them. If we don’t act now, American manufacturers will have to pay fees abroad without any protection at home. The Clean Competition Act buys us entry into this emerging coalition of allies and ensures that foreign competitors who pollute more pay more.”

DelBene said 700 union jobs at Washington state's Intalco aluminum smelter were lost because the smelter could not compete with Chinese imports, and such a bill would create a level playing field.

The bill would cover imports and domestic production of fossil fuels, refined petroleum products, petrochemicals, fertilizer, hydrogen, adipic acid, cement, iron and steel, aluminum, glass, pulp and paper, and ethanol.

In 2028, coverage would expand to finished goods that use these products, such as cars. The summary says: "Starting in 2028, Treasury shall identify which products (defined by 6-digit HTS code) typically contain 1,000 pounds of covered primary goods (e.g., a car) or that are comprised of material inputs that are more than 90% (by value) covered primary goods (e.g., certain chemicals), the covered primary goods that are contained in these imports shall be treated as if they were themselves imported.

"In 2030, these thresholds drop down to 500 pounds (e.g., a motorcycle) and 75%, and starting in 2032, the Secretary may elect to lower them further."

Five other Democratic senators and five other House Democrats are co-sponsors of the bill.