Promise and Prudence for U.S. Polluter Import Fee

Earlier this month, U.S. Senate Democrats proposed a notable measure within their $3.5 trillion budget plan: a polluter import fee that would target imports from nations lacking progressive climate policies. This announcement came on the same day as the European Union’s introduction of its border tax adjustment. This border tax adjustment would help to protect domestic manufacturing while putting pressure on other countries to reduce emissions. With the Biden administration’s ongoing push to advance a rigorous climate agenda, the urgency to tighten polluter activity rises both domestically and internationally; wildfires, floods, hurricanes, and other ever-intensifying global disruptions highlight the future state of the world as global temperatures rise. NYLCV is also pushing for an aggressive climate policy to be included in the finalized legislation.

While the Democrats have yet to produce a formal, written outline for the polluter import fee, the broader budget plan is expected to also highlight a clean energy standard, tax breaks for electric vehicles, and funding for a civilian climate corps to improve employment opportunities in renewable energy. The polluter import fee would likely require companies selling steel, iron, and other carbon-intensive materials to the United States to pay a fee, counterbalancing the carbon dioxide emitted during the materials’ manufacturing and transport. The European Union released a 291-page outline for their border tax adjustment and, while it is said to be merely a coincidence that these two proposals were released on the same day, the headlines illustrate the progressive efforts in international climate policy. While neither tax is likely to significantly change the trajectory of the climate crisis on its own, progress is progress after years of lacking a climate agenda.

Because the details of the plan are only speculative at this time, economists, environmentalists, and public officials are publicly questioning the potential details and expectations of such a fee. One of the highlights in the discussion is the complexities of actually implementing such a fee: Democrats aim to pass the budget plan without Republican votes, and many Republican officials are questioning whether the tax will promote the transition to clean energy or put an unfair burden on the United States instead. 

Creating a new carbon tariff system 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.

These complications, as well as the fear that other polluting nations will never match climate agendas similar to Biden’s promise of an emissions reduction of 50% below 2005 levels by 2030, are putting pressure on the policy agenda. Other public figures, such as Edward Aldy (environmental economist at Harvard University) have voiced their concerns as well, stating that “A carbon border adjustment is most effective if we never have to use it.” Threatening other countries into reducing emissions is feasible, but we cannot be sure of the productivity of the budget plan and subsequent tax until they are formalized, which is expected to be within the coming months. This is not to say that the polluter import fee will fail. There is an abundance of hope that this budget plan and the fee will make strides in international climate discussion and promote emissions reductions, but this is contingent on the careful fabrication of the budget resolution.