By Jarrett Renshaw
The White House is withholding support for a Democratic proposal to impose a pollution tax on imports from China and other countries, casting doubt on whether Democrats will be able to deploy what environmentalists consider one of the greatest weapons to tackle global climate change in a massive spending bill this year.
The United States is the closest it has ever been to imposing a carbon border tax – which seeks to level the playing field between U.S. companies which face environmental regulations at home and foreign competitors with less rigorous standards – after Democrats included the proposal in their $3.5 trillion reconciliation package last week that they hope to pass along party lines by mid-September.
U.S. President Joe Biden and top members of his administration have said publicly they support a carbon border tax as a tool to advance climate goals, but the White House has not endorsed the Democratic proposal, spearheaded by longtime Biden ally Senator Chris Coons. The tax, as outlined by lawmakers, would raise billions by levying a tariff on carbon-intensive imports, but leaves specific details up to the Biden administration.
The White House is concerned the Democrats’ proposal will raise prices on a host of consumer goods, from cars to appliances, and conflict with Biden’s pledge not to tax any American earning less than $400,000 per year, according to two sources familiar with the discussions. The White House is also worried any tax that raises prices could fuel Republican attacks that his policies are driving up inflation, they say.
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The White House’s concerns about a carbon border tax hitting less wealthy Americans are valid if foreign companies raise prices in response to protect profits, said David Weisbach, a professor at the University of Chicago Law School and an expert in carbon border tariffs.
“The tariff will raise consumer prices on people that buy, say, automobiles, since it’s going to be on steel and aluminum used to make automobiles,” he said, adding it would “unquestionably” raise prices for U.S. consumers earning less than $400,000 a year.