A bipartisan plan to punish global climate laggards: Tax them

In a rare example of a bipartisan climate policy, momentum is growing on Capitol Hill for a plan to tax imports from China and other countries with looser environmental standards.

Sens. Christopher A. Coons (D-Del.) and Kevin Cramer (R-N.D.) on Wednesday will introduce a bill that would lay the groundwork for America's first carbon border tax, according to legislative text shared with The Washington Post before its broader release. The senators’ goal is to impose fees on iron, steel and other imports from countries that are not significantly reducing greenhouse gas emissions.

The bipartisan bill, dubbed the Prove It Act, would take a crucial first step toward this goal. It would require the Energy Department to study the emissions intensity of certain products — including aluminum, cement, crude oil, fertilizer, iron, steel and plastic — that are produced in the United States and in certain countries.

"Using trade to advance American manufacturing — and to disadvantage dirty or high-emissions products — is ultimately the only way we’re going to put effective pressure on China, Russia and India to dramatically reduce their emissions," Coons said in an interview on Tuesday.

Cramer said Republicans are increasingly interested in a carbon border tax as a way to counter China and protect U.S. businesses.

"China's sort of an easy target," Cramer said. "They are the ones producing cheap stuff. But there are other players besides China that are dirty producers taking advantage of our system."

Co-sponsors of the bill include two other Republicans — Sens. Lindsey O. Graham (S.C.) and Lisa Murkowski (Alaska) — as well as Sens. Sheldon Whitehouse (D-R.I.), Martin Heinrich (D-N.M.), John Hickenlooper (D-Colo.) and Angus King (I-Maine).

The measure comes after the European Union in April approved the world's first tax on carbon-intensive imports. The decision will require importers to start paying the tax in 2026, although they will have to start accounting for the carbon emissions associated with their products in October.

E.U. seeks to pressure China on climate by taxing steel and cement

The bill also comes after Democrats last year enacted the most ambitious climate bill in U.S. history. The Inflation Reduction Act devoted billions of dollars to curbing harmful emissions and promoting green technologies.

No Republicans voted for the climate law, with Senate Minority Leader Mitch McConnell (R-Ky.) saying it amounted to "a war on American fossil fuel." But conservatives have increasingly embraced the idea of taxing imports from foreign adversaries — an idea that meshes with former president Donald Trump's aggressive trade policy that wielded tariffs as weapons.

"I think that Trump really had an impact on trade policy and the growing recognition that China is a major security threat to the United States," said George David Banks, who served as a White House climate adviser under Trump. "It's clearly driving this conversation within GOP circles."

For Democrats, the conversation began in earnest after the passage of the Inflation Reduction Act, which did not include a carbon border tax. The bill did, however, include green subsidies that sparked alarm among European officials, who worried that companies could shift investments out of Europe and into North America to secure the lucrative tax breaks.

Coons said his "larger objective over the next few years" is to calm these transatlantic tensions by creating a "carbon club" — a group of allied countries that have all adopted ambitious climate laws. Such a club could include the United States, the European Union, the United Kingdom, Canada, Mexico, Japan, South Korea and Australia.

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In the meantime, Coons said the Prove It Act could pass as part of a larger package aimed at helping U.S. businesses compete with China. Senate Majority Leader Charles E. Schumer (D-N.Y.) has said he wants to pass a bipartisan package that builds on last year's Chips and Science Act, which provided $52 billion to boost domestic computer chip factories.

The new bill "could certainly be part of that larger conversation about Chips 2.0," said Ben Pendergrass, vice president of government affairs at Citizens’ Climate Lobby, an advocacy group.

In 2020, U.S. imports from China totaled $434.7 billion, according to the Office of the U.S. Trade Representative. Coons introduced legislation in 2021 that would have applied to about 12 percent of imports coming into the United States, raising between $5 billion to $16 billion annually.

Whitehouse, one of the Democratic co-sponsors of the new bill, said the plan would benefit a range of U.S. businesses.

"The big industries to benefit from this are steel, aluminum, pharma and cement. And last I checked, they know their way around this building," Whitehouse told reporters Tuesday, gesturing around the Dirksen Senate Office Building.

While Republicans have warmed to the idea of carbon border tariffs, they remain resistant to a domestic carbon tax, saying it would harm the U.S. fossil fuel industry.

"Republicans are largely pretty cool to the idea of a carbon tax, and I am in that camp, coming from a coal- and oil- and gas-producing state," Cramer said.

"We spend so much time as Republicans saying ‘hell no’ to people who want to tax carbon or want to somehow decarbonize," he added. "But the whole ‘America First’ movement and agenda is a comfortable place for Republicans. So this is the low-hanging fruit of climate policy or trade policy or whatever you want to call it."

Some trade experts have raised concerns that if Congress passes a carbon border tax without its domestic counterpart, it could run afoul of World Trade Organization rules.

Joseph Majkut, director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies, said Democrats already shrugged off these concerns when passing the clean-energy tax credits in the Inflation Reduction Act.

"If concerns about the WTO were high on Congress's list, that would have been revealed in the [Inflation Reduction Act]," he said.