In a rare show of bipartisan climate momentum, senators from both parties are advancing legislation to use trade policy as a lever for decarbonization. Right now, there is growing support for the US to adopt a carbon border adjustment mechanism (CBAM) that levies tariffs on carbon intensive imports. A rules-based tariff framework based on the measurable carbon intensity of goods would provide certainty and clarity for US businesses compared to the current trade environment, while incentivizing foreign manufacturers to cut emissions and invest in cleaner production of industrial goods. Because climate change is a global problem, policymakers should prioritize efforts to lower both domestic and global emissions, as this policy would do. In addition to the climate benefits, a US CBAM stands to bolster the competitive position of US manufacturers, who in many cases produce comparably cleaner industrial goods than foreign competitors.
This week, a group of Congressional Democrats led by Sheldon Whitehouse (D-RI) in the Senate and Suzan DelBene (D-WA) in the House introduced the Clean Competition Act, legislation that would enact a US CBAM. This follows the introduction of the Foreign Pollution Fee Act (FPFA), introduced by Senators Bill Cassidy (R-LA) and Lindsey Graham (R-SC) earlier this year. Despite key differences, both of these bills would impose tariffs on carbon-intensive imports, rewarding manufacturers that limit their climate pollution.
Consistent with Carbon180’s vision and ongoing advocacy, both bills also recognize a key role for carbon removal, allowing manufacturers of covered products to lower the carbon intensity of their goods through verified carbon dioxide removal (CDR) purchases. The latest version of the Clean Competition Act allows manufacturers and/or importers of covered goods to reduce their tariff liability by purchasing verified tons removed via direct air capture (DAC) and durably stored or utilized in long-lived products. Crucially, the Clean Competition Act would also direct new revenue towards developing industrial decarbonization technologies — including potentially carbon removal. Its proposed Advanced Industrial Technology program would provide the type of robust, long-term funding industries need to scale these solutions.
A central difference between the bills’ approach to carbon removal is how they define it. The Clean Competition Act limits eligibility to direct air capture (DAC), whereas the Foreign Pollution Fee Act takes a more expansive approach. Recognizing that carbon removal technologies vary in how removals are measured and stored, the FPFA directs federal agencies to develop a “like-for-like” system, allowing a wider range of approaches to potentially qualify, provided they meet rigorous standards.
Given the nascent stage of the carbon removal industry, federal policy should support a wide range of pathways until it becomes more clear which can effectively and cost-efficiently scale. A more flexible portfolio approach, as included in the FPFA, better supports broad industry development. At the same time, we need to ensure that qualifying removals are accurately accounted for and durably stored. The CCA recognizes that continued RD&D funding will be necessary in determining which technologies qualify, and that commercializing carbon removal and industrial decarbonization solutions requires sustained federal investment.
As lawmakers work to reconcile their approaches, it’s encouraging to see broad agreement that CBAM, while fundamentally an industrial decarbonization policy, can also catalyze the carbon removal field. We look forward to continuing to develop and advance ideas for how carbon removal can be integrated effectively in a CBAM and complementary policies.
Edited by Ana Little-Saña. Image by David Vives.
