RFF Scholars Analyze New Bill That Introduces a Fee on High-Carbon Imports
A new RFF analysis provides a detailed, early look at the new policy proposal that could inform US industrial policy in the decades to come.
💡 What’s the story?
On Thursday, November 2, US Senator Bill Cassidy (R-LA) introduced a bill to reduce imports of high-carbon goods into the United States. The new bill, the Foreign Pollution Fee Act (FPFA), is the latest in a string of policy proposals put forward to keep the decarbonizing US industrial sector competitive on an international playing field.
A new analysis from Resources for the Future (RFF), released today, provides a detailed, early look at the new policy proposal that could inform US industrial policy in the decades to come.
📜 What’s in the bill?
The FPFA is an example of a border adjustment mechanism, which imposes fees on imported goods based on the amount of greenhouse gases emitted during their production. To describe the FPFA, the authors analyzed the bill using seven design elements laid out in a mid-October report.
The authors detail how the bill addresses the following:
- Covered products: Which goods will be subject to the fee
- Fees: How much importers will have to pay per product, based on the greenhouse gas emissions that are released during production
- Definition of greenhouse gas intensity: How the United States may measure the emissions associated with an imported or domestic product
- Baselines: What the greenhouse gas intensity of an imported product will be compared to
- Information resources and methods: How data can be collected and used to make sure that fees, greenhouse gas intensities, and baselines are accurate
- Domestic emissions-reduction strategies: Whether the policy will be paired with a domestic program to reduce US industrial emissions
- Clubs, alliances, and exemptions: How international agreements and partnerships may be created to develop complementary policies
“Between COP28 and the implementation of the European Union’s new fees on select imported products, the world has its eyes on international climate and trade policies. One such policy, the border adjustment mechanism, comes in many forms and is a complicated policy instrument. The FPFA illustrates that complexity. We hope that our continuing analysis can help show how the new bill may fit into US climate goals and the global decarbonization of the industrial sector.”
—Raymond J. Kopp, Senior Fellow and Director of RFF’s International Climate Policy Initiative
🔎 What are the experts’ takeaways?
The researchers note that, like other border adjustment mechanisms, the FPFA seeks to make sure that US industry—which may contend with higher operating costs as the sector decarbonizes—can stay competitive in international markets.
But the approach outlined in the FPFA is unique: its primary aim is to reduce imports of greenhouse gases embodied in primary commodities like crude oil and manufactured goods like steel from countries with highly carbon-intensive industries. In other words, it focuses on reducing US “carbon consumption.”
The authors write that the introduction of the FPFA represents an important milestone for trade-related climate policies in the US Congress. However, they see the FPFA as a starting point: The authors expect continued congressional debate and calls for the proposal to go further in addressing the United States’ industrial decarbonization goals.
📚 Where can I learn more?
Read the new issue brief, “Foreign Pollution Fee Act: Design Elements, Options, and Policy Decisions,” by RFF Fellow Milan Elkerbout, Senior Fellow Raymond J. Kopp, and Fellow Kevin Rennert.
For background, read the related report, Carbon Border Adjustments: Design Elements, Options, and Policy Decisions, which introduces the design elements analyzed in this new issue brief.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.
Raymond J. Kopp
Raymond J. Kopp is a senior fellow at RFF. During his career Kopp has specialized in the analysis of environmental and natural resource issues with a focus on Federal regulatory activity.
Kevin Rennert is a fellow at RFF. He also serves as director of the Comprehensive Climate Strategies Program and the Federal Climate Policy Initiative.
Issue Brief — Nov 6, 2023
Foreign Pollution Fee Act: Design Elements, Options, and Policy Decisions
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