Jul 20, 2021 - Politics & Policy

Democrats unveil carbon border tax plan

Illustration of a boat pulling a price tag.
Illustration: Sarah Grillo/Axios

Sen. Chris Coons (D-Del.) and Rep. Scott Peters (D-Calif.) unveiled legislation on Monday that would levy a fee on imported carbon-intensive goods, such as steel and aluminum.

Why it matters: The "border carbon adjustment," which is expected to be included in the legislative text of the Democrats-only infrastructure bill that would move through the reconciliation process, uses trade policy to help address climate change.

  • It follows a move by the European Union to implement a similar policy.

Details: The border carbon adjustment, or BCA, would protect American industries that have to pay more to comply with climate regulations from competitors based in countries that aren’t reducing their emissions as aggressively.

  • Foreign producers of goods such as steel would have to pay a fee based on each ton of carbon dioxide they emitted while producing such materials.
  • Initially, the draft bill targets the following energy and pollution-intensive products: steel, aluminum and cement, as well as natural gas, petroleum and coal.
  • The tariff may expand over time.

The intrigue: The measure might be attractive to moderate lawmakers who are worried about hobbling the domestic energy and manufacturing sectors.

Yes, but: Policies like this can be difficult to implement, especially since countries have expressed their emissions reduction goals differently.

  • Such a measure could provoke other countries to act in ways that restrict American imports.
  • In addition, considering and enacting such a measure could make diplomatic negotiations at the next United Nations climate summit even more fraught.
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