Schwab: Pay Now or Pay Later

The U.S. should establish a carbon import fee to protect domestic jobs and reduce the impacts of climate change.

by Grace Schwab | 8/20/21 4:10am

A recently released report from the Intergovernmental Panel on Climate Change has a loud, clear and harrowing message: Humans are “irrevocably” to blame for the greenhouse gas emissions that are causing rising seas, raging forest fires, devastating droughts, melting ice caps and intense heat waves worldwide. In addition, the report warns that greenhouse gases have become so pervasive that global temperatures will increase by 1.5 degrees Celsius in the next two decades. An increase of up to and over the 2 degrees Celsius mark is likely unless the United States and our global partners act fast to enact bold climate change prevention initiatives. 

It is therefore more important than ever for the U.S. to institute binding climate regulations — particularly in our international trade model, which is an often overlooked yet significant contributor to climate change. As it stands today, the U.S. lacks a formal clean energy standard for imports. This means that U.S. corporations often choose to produce products that are especially environmentally deleterious in countries that have weaker environmental regulations before shipping these products back to the U.S. for consumption. The damage of this outsourcing, called “carbon dumping,” is two-pronged: It takes jobs away from U.S. workers and undermines our climate goals by permitting polluting practices outside U.S. jurisdiction. For example, if a company were to manufacture a ton of steel in China, the process would cause more than twice as much climate pollution as it would if it were manufactured in the U.S. To consider the implication of this statistic on a larger scale, our pro-polluter trade model has made it so that the goods we import emit as much greenhouse gas as all U.S. domestic factories combined. 

Creating some form of carbon import tax is an intriguing solution to the issue of regulating the environmental impact of imports. The basic premise of a carbon tax is that any imported good that causes significant climate pollution would have an additional fee placed on top of its original price. Goods such as cement, aluminum, iron, steel, pulp, paper and chemicals account for the majority of global carbon emissions, so they would likely be the focus of the tax. 

Some opponents of a carbon import fee have argued that it would magnify inequality. Many developing countries do not have the resources or capital to address climate change, so requiring that the world’s least developed countries meet the carbon emissions standards of the most developed countries would be economically crippling. These concerns are valid — carbon import fees challenge several nondiscrimination rules within the World Trade Organization, including Article II of the WTO’s General Agreement on Tariffs and Trade laws. Still, there must be incentives put in place so that even less developed countries are held accountable for environmentally damaging practices. The data from the IPCC report indicates that climate change is too time-sensitive an issue to exempt these countries from environmental regulation. 

U.S. Sen. Chris Coons, a Democrat from Delaware, and Rep. Peters, a Democrat from California, recently proposed a carbon dumping fee called the border carbon adjustment in their FAIR Transition and Competition Act. The BCA seeks to reconcile global equity with climate change action. Specifically, the bill suggests a multi-year phasing system that slowly ramps up the intensity of the carbon fee so as not to jar countries’ economies too severely. The FAIR Transition and Competition Act recognizes that U.S. companies that choose to produce cleaner products incur greater costs, so the BCA would levy a fee on imports for goods that are more carbon-intensive. In this way, the BCA would disincentivize companies from carbon dumping and instead motivate them to meet robust domestic emissions standards so that they can enjoy duty-free global trade. 

A policy like the BCA would expose corporations for the significant role they play in climate change and ensure that they are held accountable. According to the 2017 Carbon Majors Report by CDP Driving Sustainable Economies, a mere 100 private companies and state-owned enterprises are responsible for over 70%of global carbon emissions produced since 1988. Clear climate standards are a powerful step towards holding these industry giants accountable. 

As the IPCC report warned, global catastrophe is imminent unless we act now. Part of the solution must include stopping corporations from shopping around their pollution and holding them accountable for the damage they have done to our climate; a carbon import fee is a reasonable way to do just that. It’s easy to feel helpless in the face of such a looming threat of disaster, but there is still hope to save our climate and ourselves if individual citizens, local communities, elected officials, governments and world leaders band together to create lasting, meaningful policy solutions. We must speak out and hold corporations accountable for their role in the climate crisis before it is too late.

Grace Schwab is a former intern at the League of Conservation Voters and a member of the Class of 2024.

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