GOP senator bullish on bipartisan US carbon border tax legislation in 2023

Sen. Bill Cassidy said he expects to get 60 votes for a bill to implement a first-of-a-kind US carbon border tax, to be introduced this fall.

Cassidy (R-La.) said during a May 16 press call hosted by the investor advocacy network Ceres that he is shoring up bipartisan support for the bill by avoiding "extremes" from both sides of the deeply divided Congress.

The European Union earlier the same day published its plans for phasing in the economic region's border carbon tax beginning in October, a development not lost on US lawmakers pushing for similar protections.

"There's been this kind of a light bulb that went off," Cassidy told the press call. "We'll become vulnerable to everything that the Chinese cannot get into the EU because of the [EU Border Carbon Adjustment Mechanism]. That should create pressure on Congress, and that's what I'm using as part of my conversation with colleagues."

Border carbon adjustment fees apply to imported goods from countries with less stringent greenhouse gas emission policies and specifically to the emissions intensity associated with the production of such goods. Border fees can shift manufacturing to nations with more stringent pollution laws and — proponents of a US program hope — bring back some manufacturing that US businesses sent offshore.

The new EU program requires covered importers in the region to purchase certificates on the EU carbon market equivalent to the amount of carbon "embedded" in their products. Importers that can prove they already paid a carbon price during the production of such goods can deduct the fee.

The EU fee initially applies to especially carbon-intensive products: cement, iron and steel, aluminum, fertilizers, electricity and hydrogen. Cassidy's bill is expected to cover imports of "most primary products in major industrial sectors as well as energy supply chain products," a spokesperson for the senator said in an email.

Shoring up the votes

Cassidy said his strategy for garnering support for his bill from members of Congress is not much different than when he negotiates with his wife over family matters. He said he is building support for his bill, dubbed the "Foreign Pollution Bill," by asking colleagues what matters to each of them.

Legislators with national security concerns will care about China's economic strength and military growth, Cassidy said. At the same time, environmental "hawks" will listen to the argument that Western pollution regulations have caused companies to move their factories to China — which still relies heavily on coal for electricity production — due to the lack of similar requirements.

Cassidy recalled speaking to an executive with a US company that built a manufacturing plant in China that did not have to turn on pollution controls. This increased the company's return on investment from 8.9% to 18%. "So China uses their pollution as an economic development tool," Cassidy said.

The senator said lawmakers who care about creating more jobs in the US will like a border tax that makes US manufacturing more profitable. And energy-focused members of Congress will be open to the idea of helping other countries make their products less energy-intensive by replacing their coal-fired plants with US-produced natural gas.

"By discussing the issue of lowering emissions in the context of improving our economy, and in the context of decreasing, relatively speaking, China's economy, I think I can get 60 votes," he said.

Republicans who have shown support for such a measure in the past include Sens. Kevin Cramer (R-ND) and Lindsey Graham (R-SC). Democratic senators introduced a similar carbon border adjustment bill in 2022.

Critics of carbon border fees say such policies are akin to protectionism in violation of international trade laws. Indian officials told Reuters on May 16 that the country will file a complaint with the World Trade Organization over the new EU policy, saying it serves as a trade barrier to goods from India and other developing nations.

For some US companies, however, a border carbon tax cannot come fast enough.

"We would love to see Congress find agreement for the president to sign legislation that would establish a fee on carbon-intensive products that come over the US border and compete with our cleaner domestically produced products, like cement," said Michael LeMonds, vice president of sustainability and ESG for Holcim (US) Inc., a building materials company. "Higher greenhouse gas emissions should never be a competitive advantage."

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