Border Carbon Tax w/o Underlying Carbon Fee and Dividend?

adapted from NY Times

Democrats Propose a Border Tax Based on Countries’ Greenhouse Gas Emissions

Biden buddy Chris Coons (D-DE) introduced a plan on Monday to tax iron, steel and other imports from countries without ambitious climate laws.

Lisa Friedman

WASHINGTON — Democratic lawmakers on Monday proposed to raise as much as $16 billion annually by imposing a tax on imports from China and other countries that are not significantly reducing the planet-warming pollution that they produce.

The tax would be levied regardless of whether Congress passed new laws to reduce emissions created by the United States. It would be designed to be approximately equivalent to the costs faced by American companies under state and federal environmental regulations.

Senator Chris Coons of Delaware, along with Representative Scott Peters of California, intends to attach the measure to the $3.5 trillion budget resolution.
Senator Chris Coons of Delaware, along with Representative Scott Peters of California, intends to attach the measure to the $3.5 trillion budget resolution. Credit…Al Drago for The New York Times

Experts said a border carbon tax would almost certainly provoke America’s trading partners and could create serious diplomatic challenges ahead of United Nations climate negotiations set for November in Glasgow.

But Senator Chris Coons of Delaware and Representative Scott Peters of California, both Democrats, said American companies deserved protection as the Biden administration moved forward with aggressive policies to reduce greenhouse gas emissions caused by the burning of fossil fuels.

“We must ensure that U.S. workers and manufacturers aren’t left behind and that we have tools to assess global progress on climate commitments,” Mr. Coons said.

The plan comes a week after the European Union proposed its own carbon border tax on imports from countries with lax pollution controls.

The proposal from Democrats, which Senate aides said was developed with input from the Department of the Treasury, the Office of the United States Trade Representative and other parts of the Biden administration, is expected to be attached to a $3.5 trillion budget resolution.

The White House did not respond to a request for comment on the legislation or say whether the administration endorsed it. But President Biden and administration officials have said they support a carbon border tax as a tool to advance climate goals.

Container ships at the Port of Long Beach-Port of Los Angeles complex. Credit…Lucy Nicholson/Reuters

Democrats hope to pass their budget package this year and use it as a way to expand social, educational and health care programs as well as fund a transition to clean energy and cut greenhouse gas emissions. The decision to package the proposals in a budget reconciliation bill would allow Democrats in the sharply divided Congress to pass the measure without any Republican votes.

A handful of Republican lawmakers have explored a carbon border tariff as a way to counter China and protect U.S. industries.

But Senator John Barrasso of Wyoming, the top Republican on the Senate Committee on Energy and Natural Resources, called the $3.5 trillion blueprint a “freight train to socialism” and said the Democrats’ plan for a border tariff would start a trade war.

“They’re proposing a border tax because they know punishing regulations and taxes will drive U.S. businesses overseas,” Mr. Barrasso said in a statement. He said the United States should instead work on making energy “cleaner and more affordable.”

Mr. Barrasso’s state is a major producer of coal, natural gas and crude oil, the burning of which produces the carbon emissions that scientists say are driving climate change.

A border tax is typically designed to even out the burden for a nation that has imposed a tax or price on carbon dioxide emissions. Companies abroad that want to sell iron, steel, aluminum or other commodities to the United States would be required to pay a price for each ton of carbon dioxide they emit in making their products, which would erase any competitive advantage. The hope is that it will encourage other countries to also price carbon and drive down emissions.

It also is considered a way to prevent American companies whose manufacturing processes emit heavy amounts of carbon pollution from relocating to countries with looser environmental rules, a phenomenon known as leakage.

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