One of the year’s most interesting climate policies was just proposed … by a Republican.
Two, actually.
On Thursday, Senators Bill Cassidy and Lindsey Graham released a bill that would establish a “foreign pollution fee,” a new type of tariff that would raise the cost of products imported from countries with substantially higher emissions than the United States.
If that sounds suspiciously like a carbon price, you’re not wrong: Both policies aim to make dirtier products more expensive. But unlike a carbon price, the foreign pollution fee would apply only to imported products, not to anything made within the United States. In essence, it would be a carbon tax imposed only at the border.
That would theoretically penalize China, the world’s largest emitter of climate pollution — and that’s the point. “It makes absolutely no sense that we allow China to pollute freely and export their products to the U.S. — displacing U.S jobs, manufacturing, and excellence,” Cassidy, who represents Louisiana, said in a statement.
The bill takes advantage of the fact that American heavy industries generally have cleaner processes than their Russian, Chinese, or Indian competition. Chinese plastic makers, for instance, emit perhaps twice as much carbon for every unit of production as American plastic makers.
Under the GOP proposal, the government would set country-by-country tariffs so as to bring the carbon intensity of America’s imports closer to the carbon intensity of American-made products. The tariff would focus first on a few industries, including steel and iron, minerals, plastics, and solar panels. (The Biden administration has continued Trump-era tariffs on Chinese exports of some of those products.)
The bill would set up a new council, composed of federal scientists, officials, and private sector CEOs, to advise on the right tariff level. It would also let federal trade officials negotiate exemptions for countries.
Could the bill, or a policy like it, pass? Probably not in the next 12 months: The House of Representatives is a mess and, in any case, lawmakers rarely pass major policy in a presidential election year. But beyond that, advocates are surprisingly optimistic.
That’s because Democrats in Congress have released their own versions of a carbon tariff, and although they favor different designs than the GOP proposal, they are congealing around shared goals. Earlier this year, Senator Chris Coons of Delaware and Representative Scott Peters of California advanced a carbon tariff that would impose the cost of meeting American environmental regulations on imported goods. In essence, it says that if American manufacturers have to pay to meet the Environmental Protection Agency’s rules, then foreign manufacturers should have to pay, too.
Another proposal from Senate Democrats would charge importers for the social cost of the carbon pollution emitted to make their products. That bill would set the tariff at $55 per ton of carbon and steadily increase it every year.
Even if they look different, these policies share the same objectives, Greg Bertelsen, the CEO of the Climate Leadership Council, a center-right advocacy group that supports carbon border fees, told me.
“The interesting thing about this approach is that it appeals to interests on both sides of the aisle,” he said. “The members that have introduced these policies all have an interest in lowering global emissions, improving U.S. competitiveness, and benefiting our geopolitical interests.”
How they prioritize those policies may vary — Republicans tend to focus more on competing with China, while Democrats on lowering global emissions — but virtually all the members favor the same general tools, he said. “If we’re looking to where we might be able to find common ground on these issues, this approach is the most promising one out there.”
Trade — the fact that goods move around the world — has historically been one of climate policy’s hardest problems. Because climate change is caused by the global stock of atmospheric carbon dioxide, cutting pollution in one country matters only if it ultimately reduces global pollution. Yet if a country imposes a high carbon tax, then its companies will likely respond by importing certain products from abroad.
Because of this problem, economists have historically been fonder of a carbon border fee than they are of more conventional types of tariff. In 2015, the Yale economist and Nobel laureate William Nordhaus argued for the creation of “climate clubs,” groups of countries that agree to abide by the same domestic carbon price, trade freely among themselves, and penalize nonparticipants by imposing a fee on imports.
That approach underpins the European Union’s new carbon border adjustment mechanism, or CBAM, which launched last month but which will fully go into effect in 2026. It essentially imposes Europe’s carbon price — which is set by a shared continental market — on imports into the 27-country bloc.
Cassidy and Graham, the Republican senators, are at pains to distinguish their proposed “foreign pollution fee” from that Euro-coded approach. The CBAM rewards companies that adopt greener production methods, for instance, but theirs does not: It judges countries by the carbon intensity of their industry as a whole. “China can game the CBAM easily by shifting cleaner exports to the E.U. and dirty products elsewhere,” the senators explain in an FAQ released with their bill.
Of course, what’s even more distinctive about these new American proposals is that the United States does not have a domestic carbon price at all. Instead, it has chosen to subsidize its zero-carbon industries through the grants and tax credits in the Inflation Reduction Act. But harmonizing that subsidy-driven scheme with Europe’s fee-based approach has been difficult so far; initial talks to create a shared “arrangement” for steel exports — a kind of transatlantic climate alliance — have broken down due to a lack of E.U. support.
Now, European imports probably wouldn’t face high tariffs under any of the American proposals, because E.U.-made goods are generally lower carbon than those made in the United States. But the path that America is moving toward — passing a carbon border fee without a domestic carbon price — is highly eccentric (a phrase that I mean in a non-derogatory way). A carbon tariff makes perfect political sense domestically, but it may perplex the rest of the world, and Europe especially. And the rest of the world has options: Even though China’s industry is very dirty, its government also already imposes a low carbon price on some industries and in some places.
Yet that all lies in the future. For now, I’d take this Cassidy and Graham proposal seriously: It is possible to imagine some version of this idea passing, perhaps even in a bipartisan way. And more importantly, it reveals how inseparable geopolitics is becoming from the climate challenge. On issue after issue, China and America’s rivalry over security and technology is spilling into the rest of the economy.
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Interstate Renewable Energy Council