Senate Republicans have put forth a legislation focused on addressing climate issues with a specific target on China.

A group of three Republicans, with Louisiana Senator at the forefront.Bill Cassidy

On Thursday, legislation will be introduced to charge a fee on goods imported from countries with high greenhouse gas emissions. This is intended to protect American manufacturers from competition with countries like China that have less strict environmental regulations.

The bill

The proposal, which was shared exclusively with POLITICO, is the first of its kind from the Republican party to incorporate climate change policy into U.S. trade regulations using carbon adjustment fees. This approach has become increasingly popular as developed nations with strict climate regulations aim to prevent the relocation of domestic manufacturing to countries with less stringent emissions rules, which contribute to global warming.

“In an interview, Cassidy explained that the foreign pollution fee aims to create a fair competition by imposing a fee on China if they neglect their environmental regulations. This proposal is viewed as a Republican approach to addressing climate issues.”

American companies operating in sectors like steel production have cautioned that implementing regulations mandating a decrease in carbon dioxide emissions will result in increased expenses and leave them at a disadvantage compared to imports from nations without similar restrictions. This could potentially hinder efforts to revitalize the manufacturing sector in the United States.

John Cornyn and Mark Warner

The latest legislation introduced by Cassidy expands upon a previous bipartisan suggestion made by Senators John Cornyn and Mark Warner. Kevin Cramer (R-N.D.) and Chris Coons (D-Del.), who introduced legislation that would order the Energy Department to deliver a study into the emissions intensity of producing various goods in different countries in order to demonstrate the relative “carbon advantage” that U.S. companies have over their foreign competitors.

Rose to prominence during the administration of former President Donald Trump.

Cassidy’s bill is co-sponsored by Sens. Lindsey GrahamRoger Wicker

(R-Miss.) serves as the leading member of the Armed Services Committee.

Wicker stated that it is unfair for American manufacturers to be at a disadvantage due to their exceptional efforts in enhancing their manufacturing methods.

The new proposal from the Republicans does not include a domestic carbon price to accompany their “foreign pollution fee.” While Republicans have rejected the idea of placing a price on goods, some conservative economists see it as a more efficient approach to addressing climate change compared to complex pollution regulations or cap-and-trade systems.

According to the law, the border fee would be determined by the amount of emissions a product produces or its carbon footprint during production.

According to George David Banks, a former climate advisor for Trump who assisted with the creation of the new bill, this is the first comprehensive statement from the Republican party regarding their stance on climate and trade policy without including any form of carbon pricing. Banks believes that this approach of not including carbon-based emissions performance as a factor will serve as the foundation for the United States’ final position on the matter.

Some advocates for fighting climate change through a U.S. carbon tax are concerned that implementing a tax on imports without also having a domestic carbon price would go against regulations set by the World Trade Organization. However, one of them did express support for the recent proposal made by Republicans.

“I commend Senator Cassidy for his efforts in rallying support for his proposal within the GOP caucus and am eager to reach a compromise,” stated the Senator.Sheldon Whitehouse100

The Whitehouse in D-R.I. currently has 100 occupants.introduced legislation

Last year, there was a proposal to implement a carbon import tax and a domestic fee, but the bill has not been discussed in committee.

The implementation of carbon tariffs has become more pressing as the European Union starts implementing its own carbon border adjustment mechanism in early October. This measure, also known as “CBAM,” is set to take effect in 2026 and would be applied to imports of cement, iron and steel, aluminum, fertilizer, electricity, and hydrogen from countries with less ambitious emissions-reduction policies. This may potentially include the U.S., as the EU’s policy is linked to its emissions trading system and aimed at countries that do not have a specific carbon pricing system in place.

According to experts, members of both the Republican and Democratic parties are in favor of implementing a tariff based on the carbon content of products, although their reasons for doing so may vary.

Joseph Majkut, director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies, stated that policymakers from both political parties view connecting climate and trade as a crucial component of the United States’ overall strategy for addressing climate change. This can be attributed to a sense of urgency in reducing emissions or a belief that the U.S. has been at a disadvantage in trade deals for the past few decades. As a result, they see implementing border adjustments as a solution to both issues.

Cassidy attempted to prevent possible criticism from supporters of free trade in both political parties by clarifying that his proposed legislation should not be seen as protectionist. He explained that it is not a traditional tariff because any nation has the option to avoid the charge by meeting the same pollution standards as the United States.

“In the end, the objective is for China to no longer have to pay this international pollution fee,” stated Cassidy. “This can be achieved by reducing the carbon intensity of their products to a level similar to that of the United States and other developed nations. Therefore, it is not a permanent fee, but one that can be avoided by meeting the necessary requirements.”

The level of pollution in the United States is determined by the emissions data that companies report to the Environmental Protection Agency. This measurement is based on the average across the country for certain goods, such as energy sources like natural gas and oil, as well as industrial materials like aluminum, cement, glass, iron, steel, and petrochemicals.

The fee rate for imports, as outlined in the proposed law, aims to limit the pollution intensity of a specific product to no more than 50% higher than that of the U.S. This difference in intensity will decrease to 25% and then 10% over time. Imports from countries with a pollution intensity within 10% of the U.S. will not face penalties.

The legislation includes exceptions for paying a fee, such as for goods that have a pollution intensity within 50 percent of the U.S. and are made in countries that have approved free trade deals with the U.S. It also allows for national security exemptions that mandate sourcing a product from a designated country.

Cassidy argues that his actions align with the strategy of President Joe Biden, who has continued some of Trump’s trade policies and is collaborating with the European Union to solidify a groundbreaking plan that promotes the trade of low-carbon steel and aluminum in order to decrease dependence on China.

The goal of his legislation is to motivate developing nations, such as India and Vietnam, to create “international partnerships” with the U.S. By doing so, these countries would adopt comparable climate and trade policies and receive favorable access to the U.S. market for their goods.

Cassidy suggested that there is a chance for a significant deal, as a pollution fee aligns with the bipartisan initiatives in Congress to simplify the permitting process for domestic energy projects.