CO2 border tax would help U.S. reach climate goals — report

E&E News
May 26, 2021
By Sara Schonhardt

The Biden administration is reaching deep into its toolbox for ways to lower carbon emissions and boost U.S. manufacturing. So far, that hasn’t included a border tax on carbon-intensive imports.

But it should, according to a new report organized by the Climate Leadership Council, a research organization that advocates for a carbon fee.

“A properly designed domestic climate policy allows us to create a benefit for carbon-efficient domestic industries,” said Catrina Rorke, the group’s vice president of policy. “We can increase domestic manufacturing; we can onshore domestic supply chains; we can boost job creation in the United States, all while we’re pricing carbon and cutting emissions.”

The report, which was conducted by the business intelligence firm CRU International Ltd., focuses on the U.S. steel industry, which it says emits 50% to 100% less carbon dioxide per metric ton than imported steel.

If all producers that sell steel in the United States were forced to pay a carbon price at the border, sales of U.S. steel could grow by as much as 9%, the report says.

At the same time, steel imports would fall by around half and could potentially be eliminated from Brazil and China, both of which rely on fossil fuels to power their industrial sectors.

“Today, U.S. manufacturers get no credit for producing goods with fewer emissions than their international competitors,” Climate Leadership Council CEO Greg Bertelsen said in a statement. “Climate policy can reward U.S. manufacturers for their cleaner operations and give them a competitive advantage over high-emitting manufacturers overseas.”

The benefits don’t just apply to steel. According to an earlier report by the Climate Leadership Council, around 75% of all U.S. imports come from less carbon-efficient countries.

Proponents of a carbon fee say it would encourage industries to move toward less-polluting forms of production, while a border carbon adjustment would help level the playing field by applying a tax to imports and a rebate on exports. Both are needed for the benefits of a border tax to work, supporters say, but so far, U.S. officials haven’t committed to either (Climatewire, May 7).

U.S. climate envoy John Kerry said recently that the Biden administration is looking into the idea of a carbon border fee, but he wanted to understand its “downstream impact.”

“Our preference would be that every country is joining in in a fair manner in its efforts to reduce emissions sufficiently,” he told reporters during a visit to Berlin, according to the Associated Press.

The European Union plans to release a proposal of its border adjustment mechanism in the coming months. But critics worry that such measures can be seen as protectionist, and emerging economies that might be disadvantaged by the policy have raised concerns.

To be sure, there are challenges.

It can be difficult to determine the carbon emissions associated with a specific product, especially if its parts are made in different countries.

Rorke said a border carbon adjustment puts the United States on a stronger footing in international climate diplomacy.

“We want to design domestic climate policy to be really effective at cutting domestic emissions, but also we want to make sure we’re designing domestic climate policy that brings other international actors to the table,” she said.