Carbon tariffs are coming. Here’s how the U.S. is preparing

E&E News
June 16, 2022
By Sara Schonhardt

The world’s first carbon border fee was always expected to roil nations that export their emissions through polluting goods. Now it could go further than originally proposed.

The European Union brought carbon border adjustments into the spotlight last year. Since then, the proposal has gained momentum among legislators who want to expand its scope and ambition and raised discussion among other countries considering similar measures. Across the Atlantic, U.S. lawmakers and industry are keeping a close watch, wary of how it might impact American trade and manufacturing.

The latest amendments would increase the number of sectors covered by the tariff to include organic chemicals, hydrogen and polymers, with more to come by 2030.

Adding those sectors would increase the value of trade impacted by the fee from $2.8 billion — the value of U.S. exports for steel, iron, aluminum, cement and fertilizer — to nearly $16.9 billion, according to the Climate Leadership Council, a center-right organization that advocates for a carbon fee. That would be equivalent to around 16 percent of U.S. exports to the E.U. in 2020.

Tracking the potential impact to American exports could be a key point of negotiations between the U.S. and E.U., said Catrina Rorke, senior vice president for policy and research at the Climate Leadership Council.