Carbon border adjustment can help reduce carbon emissions

Have you ever heard of the Carbon Border Adjustment? It might be, if you’re a regular reader of this page, because it’s kind of become a topic here. Perhaps you saw Brooke Cusack’s April 7 comment in favor of the Border Carbon Adjustment (BCA), or Jackson Blackwell’s September 19, 2021 endorsement of the Baker-Shultz Carbon Dividend Plan, which includes a BCA. And I sincerely hope you read and remember my April 4, 2021 post calling for a carbon royalty and dividend plan with a BCA.

After reading all this love for the carbon border adjustment, you may have been puzzled to see Amy Seitz’s June 19 comment on behalf of the Alaska Farm Bureau, describing a carbon border adjustment tax (or “BAT”, in his turn of phrase) as “awful”. Could we even all be talking about the same thing? Well, yes and no.

A Carbon Border Adjustment (variously called BCA, BAT or CBAM, Carbon Border Adjustment Mechanism) is a tax or tariff on certain goods traded between countries, such as fossil fuels themselves, but also energy-intensive such as steel, cement, fertilizers, paper and aluminum. If the United States had a domestic carbon price, as Mr. Blackwell and I have called for, where the carbon charge increased the cost of a domestic product, the BCA charge would ensure that an imported product bears the same carbon cost. For example, if a US carbon tax increased the cost of a ton of steel made in the United States by $25, a ton of steel imported from a country that has no carbon price would be charged $25 at the border to make up the difference. (It is true, as Ms Seitz pointed out, that making polluters pay will tend to raise consumer prices, but this can be mitigated by a carbon dividend; what would be horrible would be to continue doing nothing to tackling the climate crisis.)

However, there is another angle to the BCA concept. What if a US industry already has a lower carbon footprint than the same industry in a competing country, regardless of carbon pricing? Shouldn’t cleaner American industry be rewarded for past investments that have already reduced their climate impact? For example, steel made in the United States has about half the carbon footprint of the global average. Could steel made overseas be charged a BCA to make up this difference? Some lawmakers think so.

While the United States does not have a national carbon price, a BCA based solely on carbon footprint is the subject of bipartisan discussions in Congress.

Why now? The European Union (EU) is set to launch a CBA over the next three years that will take into account both carbon pricing and carbon footprinting. Their BCA will begin with carbon footprint documentation and verification from 2023, and BCA fees will be imposed from 2025 or 2026. A similar move is also being discussed in Canada. The EU is the largest foreign market accessible to US exporters, and Canada is our largest domestic trading partner. These countries account for $1.8 trillion in trade with the United States at last count, so we have to be careful.

But there is an important twist. The United States is a member of the World Trade Organization (WTO) and is therefore subject to certain rules on international trade practices. WTO members agree to refrain from trade policies that unfairly benefit their domestic businesses over those of other countries. An ACC could be subject to a WTO challenge if it violates these rules. Given that 34 of 36 developed economies already have a carbon price in place, it would be particularly easy for the United States to lose a trade dispute triggered by the implementation of a CCA that violates WTO treaties. . If we pair a BCA with a national carbon pricing plan, no such problem arises.

The bottom line is that if a US BCA without a carbon price is a step in the right direction, it will be much better for our economy and for the climate when we enact a national price on carbon pollution, with a BCA to take responsible for imports. . But given how much American innovation has reduced the carbon footprint of our products compared to many of our competitors, a self-contained BCA has considerable merit. Please encourage the senses. Lisa Murkowski and Dan Sullivan to get to grips with this debate, because an American BCA could be a winning bet for our economy.

Tim Hinterberger is an Anchorage resident for 30 years and a volunteer with the local chapter of the Citizens’ Climate Lobby.

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Eleanor C. William