Last week, a trio of Republican senators introduced a bill that could be a win-win for reducing global carbon emissions and advancing our economy.
The Foreign Pollution Fee Act of 2023 — co-sponsored by Sens. Bill Cassidy (R-La.), Lindsey Graham (R-S.C.), and Roger Wicker (R-Miss.) — would charge certain industrial and energy imports a fee if they are more emissions intensive than equivalent American products.
Such a foreign pollution fee, more commonly known as “carbon border adjustment,” is long overdue. For decades, American manufacturers have been held to high environmental standards, producing some of the cleanest products in the world. However, this has put our companies at a competitive disadvantage relative to foreign firms that enjoy much laxer standards. As a consequence, this unequal treatment has incentivized multinational companies to offshore factories and jobs, and unfairly penalized employers who have kept jobs at home.
To counteract this “carbon leakage,” the legislation would charge commodity imports a fee if they are dirtier than their American equivalents. By holding all products to the same high standards, we can create a level playing field for all producers, domestic and foreign. Over time, this will bring jobs back home and revitalize our manufacturing industries.
A carbon border adjustment brings other benefits as well. An obvious one is that it raises tax revenue from foreign companies. The European Union recently launched a carbon border adjustment of its own, which is expected to raise €36 billion ($38 billion) per year. Revenue from our border adjustment could be invested in helping workers transition to clean manufacturing jobs, strengthening our infrastructure against extreme weather, or even balancing the budget.
But the benefits are not just economic. Because carbon emissions are declining in developed countries but still increasing globally, we need policies that can help the developing world decarbonize. A U.S. carbon border adjustment would achieve this by incentivizing foreign firms that want to sell into our market to clean up their manufacturing. Especially when 90 percent of air-pollution-related deaths occur in developing countries, we need policies that can move foreign countries to protect the health and lives of their citizens.
Critics claim that a carbon border adjustment would hurt U.S. consumers. By protecting American manufacturers from foreign competition, a border adjustment would raise prices for consumers. But this kind of argument ignores two crucial facts. First, competition only works properly on a level playing field. “Free trade” is not fair if the rules don’t apply to everyone equally. Second, consumer prices are only one half of the cost of living equation — the other half is jobs and wages. Sadly, Americans who live in communities ravaged by decades of deindustrialization and “free trade” policies know this all too well.
Others point out that carbon border adjustments will hamper exports from developing countries and thus hurt their economic growth. This is indeed a valid concern, which the legislation addresses with relaxed standards for low-income countries if they enter into “international partnerships” with the U.S.
Still, we should be careful with how this valid concern is addressed. If overdone, no-strings-attached exemptions could undermine the point of the policy in the first place. Rather, a better approach may be to maintain high standards but partner with developing countries in deploying American technologies for clean energy and manufacturing. This would be a win-win for both sides: developing countries can leapfrog dirtier 20th-century technologies, and the U.S. can reclaim our leadership in advanced clean manufacturing.
Of course, developing countries have a right to develop just as we have. Indeed, we can and should help them achieve that. But we should also keep in mind, as Republicans have long stressed, that we need to reduce global emissions if we want to solve the entirety of the climate problem and not just part of it. A global problem requires a global solution, and the Foreign Pollution Fee Act of 2023 may just be that solution we need.
Matthew Lee is the federal policy specialist at the Evangelical Environmental Network (EEN). He previously worked at the Niskanen Center and is a graduate of Stanford Law School.
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Author: Matthew Lee, opinion contributor