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Carbon tariff brain trust

Mar 9, 2023
George David Banks

BPC's George David Banks. Photo: Atilgan Ozdil/Anadolu Agency/Getty Images

🗣 Advocacy groups, think tanks and Hill staffers have been meeting behind the scenes to try to develop a consensus on carbon tariff policy.

Why it matters: It’s one of the most important climate conversations in the post-Inflation Reduction Act world, and these are the people who will help write the bills and work through the kinks.

  • Taxing carbon-intensive imports, such as steel and cement, could help reduce global emissions from industrial sectors that are difficult to decarbonize.

Details: The Bipartisan Policy Center hosts a border carbon working group that’s been meeting regularly for more than a year.

  • It brings together Hill staffers and groups including Resources for the Future, World Resources Institute, Climate Leadership Council and Silverado Policy Accelerator.
  • “BPC has kind of emerged as the focal point, the convener, of these different groups and very much of a participant in helping think through the policies and the ongoing conversations on the Hill,” said George David Banks, a fellow at BPC.

Meanwhile, the Climate Leadership Council is holding its own meetings on carbon tariff policy through its Center for Climate and Trade.

  • Those discussions include CLC’s founding members and other steel and chemicals manufacturers, CEO Greg Bertelsen told Nick.

The intrigue: There’s a lot of buy-in around D.C., and the policy sits at a political mesh point.

  • Democrats are largely interested in carbon tariffs as a way to reduce emissions, while Republicans view it as a geopolitical tool to go after imports from China. Both sides see potential to support domestic industry.

On the GOP side, Sen. Bill Cassidy plans to unveil a discussion draft of his “foreign pollution fee” bill in the next few months, and Sen. Kevin Cramer is developing his own version.

  • Sen. Sheldon Whitehouse told Axios he’s going to reintroduce his Clean Competition Act, which would pair a carbon import fee with a domestic carbon price for big emitters. A Whitehouse spokesperson said his office "has closely followed the work that groups like the Bipartisan Policy Center have done."
  • Sen. Chris Coons circulated another carbon border proposal in 2021.

Go deeper: Members of the BPC working group disagree on the fine points, but the policy with the most political potential is a carbon border adjustment based on emissions performance.

  • The idea is to tax industrial imports based on their embodied carbon — a measure of the amount of planet-warming gases emitted to produce them.
  • The U.S. could negotiate with trading partners to form a “carbon club” of countries with similar standards and slap a carbon levy on imports from outside the club.

Of note: This could be done without a carbon tax in the U.S. That would avoid a political mine field with Republicans, who generally oppose any price on domestic emitters.

  • "That's been a big move, and that's one of the things that I think has created this opportunity for bipartisan agreement,” said Xan Fishman, BPC’s director of energy policy and carbon management.

Yes, but: This policy is immensely complicated, new to the scene and politically difficult.

  • “People are throwing around the term 'carbon club' very loosely, and if you ask five people, you would get five different definitions of what that means,” said Melissa Barbanell of World Resources Institute, who’s involved in the working group.
  • And even if advocates could find 60 votes in the Senate, there’s virtually no interest in the House as of yet.

The bottom line: Experts say they need more modeling and data to make this work, and that’s exactly what these NGOs are trying to provide.

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