Democrats Call for a Tax on Imports From Polluting Countries
The party’s $3.5 trillion budget plan would include a carbon tariff, as well as a host of other climate actions.,
WASHINGTON — Democrats have agreed to include a tax on imports from nations that lack aggressive climate change policies as part of a sweeping $3.5 trillion budget plan stocked with other provisions aimed at ratcheting down fossil fuel pollution in the United States.
The move to tax imports was made public Wednesday, the same day that the European Union outlined its own proposal for a similar carbon border tax, a novel tool that is designed to protect domestic manufacturing while simultaneously pressuring other countries to reduce the emissions that are warming the planet.
The two actions in concert suggest that government leaders are turning toward trade policy as a way to attack climate change.
Top Democrats called the timing coincidental but said both the United States and Europe must work together to put pressure on China and other heavy polluting countries to reduce emissions.
“The United States and the E.U. have to think in terms of the leadership that we can provide and the message that we have to send to China and other countries that would take advantage of the high standards that we are going to enact,” Senator Edward J. Markey of Massachusetts said in an interview.
The budget plan also includes a number of significant Democratic priorities on climate change, including a mechanism known as a clean electricity standard that would require power companies to gradually ratchet up the amount of electricity they generate from wind, solar and other sources until they’re no longer emitting carbon dioxide.
There are also new tax breaks for wind, solar and other renewable energy, as well as electric vehicles, a “methane reduction fee” and funding for a civilian climate corps, modeled after New Deal-era programs, to create jobs in addressing climate change and conservation, according to lawmakers. The plan does not specify how much money will be allocated to the various programs.
The budget blueprint must surmount multiple political and procedural obstacles before it becomes a reality.
And skeptics caution that a carbon border tax, which has yet to be implemented by any country, would be difficult to carry out, and could anger trading partners and face a challenge at the World Trade Organization.
Unlike the Europeans, who outlined their plan in a 291-page document, Democrats released no details about their tax proposal on Wednesday. Calling it simply a “polluter import fee,” the framework does not explain what would be taxed, at what rate or how much revenue it would expect to generate.
But in theory, a carbon border tax would require companies that want to sell steel, iron and other goods to the United States to pay a price for every ton of carbon dioxide that is emitted during their manufacturing processes. If countries can’t or won’t do that, the United States could impose its own price. But verifying the amount of carbon pollution produced by foreign manufacturing is tricky, experts say.
“A carbon border adjustment is most effective if we never have to use it,” said Joseph E. Aldy, a Harvard University environmental economist who served as a top energy and climate adviser to former President Barack Obama.
“If we threaten to use it and that means all our trade partners up their game and do a lot more to reduce emissions, then we never have to use it,” Dr. Aldy said, adding, “I think that can be quite important and quite effective.”
Carbon border taxes are also designed to protect domestic manufacturing. If an individual country commits to cutting emissions domestically, it runs the risk that, for instance, its steel and cement factories will face higher costs and be at a disadvantage to foreign competitors with looser environmental rules. Steel and cement production could shift overseas as a result, undercutting the climate policy, since foreign factories would be emitting just as much or more carbon dioxide elsewhere.
“This legislation will assert American leadership on the climate crisis, but we also can’t be ‘Uncle Sucker’ where other countries, led by China, take advantage of what we are going to ask our country to undertake,” Mr. Markey said.
Senator Chuck Schumer of New York, the majority leader, said he included the tariff because “it prevents other countries from polluting.”
China is the world’s top emitter of greenhouse gases that are driving global warming, followed in descending order by the United States, the European Union, India, Russia, Japan, Brazil, Indonesia, Iran and Canada.
Scientists have warned that the world needs to urgently cut emissions if it has any chance to keep average global temperatures from rising above 1.5 degrees Celsius, or 2.7 degrees Fahrenheit, compared with preindustrial levels. That’s the threshold beyond which experts say the planet will experience catastrophic, irreversible damage. Temperature change is not even around the globe; some regions have already reached an increase of 2 degrees Celsius.
President Biden has promised to cut the United States’ greenhouse gas emissions by 50 to 52 percent below 2005 levels by 2030. The White House did not immediately respond to a request for comment. A Senate leadership aide said the Biden administration has raised the idea of a carbon border tax with lawmakers. Earlier this year, it floated the notion of taxing carbon-intensive imports as part of a broader trade policy.
The budget resolution is yet to be written. That work will be done by various committees in the coming months.
“Now we have to put pen to paper and flesh it out, but I think that the principle here is at least a methane fee, some kind of border adjustment, although there are serious technical challenges there,” said Senator Brian Schatz, Democrat of Hawaii.
Some lawmakers believe a border carbon tax could soften Republicans and others who oppose climate change policies on the grounds that cutting fossil fuel pollution puts an onerous burden on American companies and gives other nations an unfair advantage.
Republicans did not respond to requests for comment on the proposed carbon border tax but Senator Mitch McConnell of Kentucky, the Republican leader, called the $3.5 trillion package “wildly out of proportion to what the country needs now.”
Democrats intend to try to pass the budget bill without Republican votes, but that requires every Senate Democrat and the independents aligned with them to endorse it, which is no small feat.
Senator Joe Manchin, Democrat from coal-rich West Virginia, has repeatedly said that he believes many of the climate measures sought by the Biden administration are too aggressive, in part because he does not want the United States to be at a competitive disadvantage.
“In the next 10 years 90 percent of the pollution will be coming from one continent, Asia, and they’re not going to invest the money it will take to find the new technologies,” Mr. Manchin told reporters on Wednesday. He did not comment on the idea of taxing imports from polluting countries but he maintained that moving away from fossil fuels entirely is unrealistic.
“It won’t happen. It can’t happen and it doesn’t do a darn thing but make the world worse,” he said.
Mr. Manchin also declined to say whether he would support a clean electricity standard but he did not rule out voting for the budget proposal or package that will follow.
Emily Cochrane contributed reporting.