Senate Democrats Push To Impose Carbon Tariffs

Senate Democrats are proposing to impose tariffs on carbon-intensive imports to help pay for their $3.5 trillion tax-and-spending infrastructure proposal, in a surprising move that opens up a web of complex questions.

Their push came on the same day that the European Union unveiled its own long-anticipated carbon border adjustment as a way to prevent domestic industries from moving overseas to escape the bloc’s aggressive new plans to raise the price of using fossil fuels.

But unlike the Europeans, Democrats released no details about their tax proposal yesterday, 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, the New York Times reports.

Sen. Chuck Schumer, the majority leader, said he included the tariff because “it prevents other countries from polluting.”

Proponents of the policy positioned the plan as a way to work with the EU to combat pollution from China, which has the most carbon-intensive economy.

“The United States and the EU 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,” Sen. Ed Markey of Massachusetts told the Times.

The challenge for Democrats: Their climate policies are mostly theoretical at this point until Congress approves legislation, and Democrats are not proposing a domestic carbon price plan that most experts say the U.S. would need to impose its own tax on other countries’ exports.

The EU, by contrast, has had an emissions trading scheme since 2005, giving it ample reason to act now.

One problem with doing a border carbon adjustment without a carbon tax relates to accounting. If the U.S. set a carbon tax starting at $50 per ton, for example, the U.S. could simply tax imported goods equivalently.

But without such a point of comparison, it would be difficult to come up with a fair rate to tax imports. …snip…

Shuting Pomerleau, a Niskanen Center climate policy analyst, is more skeptical about Democrats’ import tariff effort if lawmakers won’t try to pass a carbon tax.

“From the administrative perspective, it would be a daunting task,” Pomerleau told me.

Pomerleau noted the top climate policy priority of President Joe Biden and Democrats — a clean electricity standard — only applies to the power sector (which accounts for less than 30% of U.S. emissions) and is not economy-wide like a carbon price.

“I would imagine a scenario in which trading partners would say that is only one sector-specific standard,” Pomerleau said.

Read rest at Washington Examiner