(Bloomberg) -- Senate Democrats are moving to impose tariffs on carbon-intensive imports as a way to help pay for their tax-and-spending legislation, according to one person familiar with the plan.
The measure is included in a $3.5 trillion budget blueprint developed by Senate Democrats as a way to advance major Biden administration policy initiatives, including addressing climate change, expanding Medicare and reforming immigration.
The plan also includes expanding tax credits for renewable energy and electric vehicles as well as the creation of a clean energy standard that could mandate utilities generate carbon-free power.
Senator Jeff Merkley of Oregon said in an interview Wednesday that “there is a lot of support for this idea” of a border adjustment tax on high-carbon products.
The size and scale of the potential “polluter import fee,” as it was described in a summary document of the plan, were not immediately clear. But the plan dovetails with efforts by other countries -- including the European Union -- to use trade policy as a tool for curbing greenhouse gas emissions.
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G-20 finance ministers recognized carbon pricing as a potential tool to combat climate change in a communique last weekend, and the EU is unveiling its own plan for a carbon border adjustment. Biden administration officials also have been mulling the approach, which could protect domestic workers and give an advantage to U.S. manufacturers producing goods with fewer emissions than foreign competitors.
Interest in a tariff on carbon-intensive imports has gained ground in Washington and around the world, as a way to encourage slow-moving countries to crack down on their own greenhouse gas emissions.
Creating a new carbon tariff regime would require navigating thorny trade policy and domestic policy considerations, which industries and products would be taxed, how to assess the amount of carbon embedded in imported goods and, potentially, how to judge the policies of countries supplying them.
The goal would be a tax regime that creates a level playing field for U.S. companies, which don’t pay an explicit carbon tax but must comply with regulations that impose a de facto price on carbon. U.S. exports to countries with less stringent climate policies could even receive rebates.
©2021 Bloomberg L.P.
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