By Lisa Friedman
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.
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.
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A carbon border tax does threaten to make items made with imported products — including medical devices, automobiles and appliances — more expensive for American consumers if foreign companies raise their prices, said David Weisbach, a professor at the University of Chicago Law School and an expert in carbon border tariffs. Senate aides argued that the legislation is designed to avoid causing price hikes across goods by taxing only limited items at first.
Mr. Coons said he intended the tariff to act as a “complement” to the new climate policies that Democrats intend to pass in the budget package, like a mandate to require as much as 80 percent of U.S. electricity to come from low or zero-carbon energy sources.
“We have a historic opportunity to demonstrate that climate policy goes hand-in-hand with providing economic opportunities as U.S. innovators develop and scale clean energy technologies,” he said.
Mr. Biden has pledged to cut U.S. emissions roughly in half by 2030 and reach net-zero emissions by 2050. The United States, however, does not tax industries for the carbon they produce. Political analysts say it is unlikely the Congress will enact a carbon tax for domestic manufacturers and utilities in the near future.
Instead, the plan calls for federal agencies to calculate the environmental cost incurred from complying with “any federal, state, regional or local law, regulation, policy or program” designed to reduce emissions.
That could refer to things like the regional cap-and-trade systems that 13 states have adopted; state renewable fuel or electricity standards that promote clean energy use; or even the burden of complying with federal regulations under the Clean Air Act.
“I’ve never seen a border adjustment that adjusts for regulatory costs,” Mr. Weisbach said. “That’s going to be hard to do.”