Illustration: Sarah Grillo/Axios
The Biden administration's struggles to strike a deal with the EU on green steel and aluminum offer some warning signs for Congress on carbon tariffs.
Why it matters: A sectoral deal like this could be a model for the kind of ideas being bandied about on the Hill.
- If the U.S. can't reach an agreement here, it'll reveal how hard it would be to negotiate the details of a broader carbon tariff regime. Or it could give lawmakers an opening to act on their own.
Driving the news: Sen. Chris Coons said he's looking for a legislative vehicle to move the PROVE IT Act in light of talks with the EU hitting a rough patch last week.
- The bill would require a comprehensive study of industrial greenhouse gas emissions to lay the groundwork for a U.S. carbon tariff regime.
- Coons said he raised the legislation during a "constructive conversation" with EU President Ursula von der Leyen.
- "They're concerned and agitated, just broadly speaking, about the potential … impacts of the IRA. We're concerned about the tensions inevitably caused by tariffs," Coons told Axios. "There has to be room here for some reconciliation between our country and their region."
Flashback: The U.S. began talks with Europe on "sustainable steel and aluminum" in 2021 with the goal of limiting carbon emissions and countering excess steel coming into the market from China.
- It's part of a negotiation to cool off former President Trump's trade war with the EU.
- The two parties didn't reach any conclusions after a White House summit Friday, despite setting an initial deadline to strike a deal by the end of this month.
What they're saying: "Some of what they do should be [done by] Congress," Sen. Bill Cassidy told Axios.
- "It's going to take both parties coming together to figure out how we balance this tension between our economy, the need to reduce carbon intensity, our national security and energy use," he said.
- For Congress, the stalemate with the EU "gives us a bit of an outline of what's doable," said Sen. Kevin Cramer.
- If these talks fall through, "that's all more reason for Congress to get behind it," said Rep. Scott Peters, who's leading a House version of the PROVE IT Act.
Of note: Cassidy said he hopes to unveil his "foreign pollution fee" bill this month.
- He's pushed back the timing of this repeatedly, but it'll be an important GOP marker.
Zoom in: The EU has started implementing its own carbon border adjustment mechanism, set to go into full force in 2026.
- That's part of why the Europeans don't want to go along with the Biden administration's proposed "carbon club" for steel and aluminum.
- The focus of negotiations over the next two months will be on excess capacity, but the U.S. still wants to inject carbon emissions into the discussion down the road, according to a source familiar with the talks.
The big picture: Trade will be an issue on the campaign trail again in 2024. The policy conversation in Congress is about building long-term support for a new paradigm for the industrial sector.
