Learn about the Foreign Pollution Fee and Clean Competition Acts

By Dana Nuccitelli, CCL Research Coordinator

In June of 2022, CCL volunteers asked our Republican members of Congress to consider putting a price on the extra carbon it takes to make many dirtier products that are imported into the United States. And they listened! 

Exactly one year later, the bipartisan PROVE IT Act was introduced by Senators Coons (D-DE) and Cramer (R-ND) to begin calculating how much carbon it takes to make a variety of products in the United States compared to other countries. In November of 2023, Senators Cassidy (R-LA) and Graham (R-SC) introduced the Foreign Pollution Fee Act to put a price on imported products with more associated carbon pollution than their American counterparts. And in December of 2023, Senator Whitehouse (D-RI) and Representative DelBene (D-WA-01) reintroduced the Clean Competition Act to put a price on the extra carbon content of both imports and domestic products.

I recently gave a Citizens’ Climate University training to educate CCL volunteers about these bills, and to compare them to the previously introduced FAIR Act. I discussed why these proposals are important, how they’re similar and different from each other, and what’s next in Congress. Watch the full training here or read on for a recap:

What are carbon tariffs and CBAMs?

Countries with a domestic carbon price can choose to apply that price to the carbon content of products they’re importing from nations without a carbon fee. They can also choose to refund the domestic carbon fee for products that their industries export to countries without a carbon price. These measures would balance the playing field, so that industries in countries with a carbon price aren’t at a disadvantage compared to dirtier foreign competition. 

These carbon price adjustments on imports and exports are components of a carbon border adjustment mechanism, or CBAM. And a CBAM could also account for the carbon intensity of the imported products, which would be beneficial for American industries, where we have relatively low-carbon manufacturing but so far lack a domestic carbon price.

A carbon tariff, on the other hand, would just apply a carbon price to the extra carbon content of imported products. This is a relevant concept in the United States, given our current lack of a domestic carbon price and our low-carbon manufacturing due to factors like strong environmental and climate regulations. The Climate Leadership Council estimates that American products are 40% less carbon intensive than the global average, and we import 75% of our goods from less carbon-efficient countries. 

So, a price on the extra carbon content of imports would encourage more purchasing of low-carbon products made in America, while incentivizing dirtier foreign competition to reduce their emissions to avoid paying the fee.

The bills introduced in Congress

The first bill introduced to gauge interest in carbon tariffs and CBAMs came from Senator Coons and Representative Peters (D-CA-50) in July 2021 in the form of the Fair, Affordable, Innovative, and Resilient Transition and Competition Act, or FAIR Act. This bill would task the government with estimating how much it costs American industries to comply with environmental regulations to reduce carbon pollution, and apply those same costs to imported products in order to balance the playing field. The FAIR Act has not been reintroduced in the current session of Congress.

Senator Whitehouse and colleagues first introduced the Clean Competition Act in June 2022 and reintroduced it in December 2023 along with Representative DelBene and colleagues in the House. This bill is a full-blown CBAM, and all of its cosponsors are Democrats.

Senators Cassidy and Graham introduced the Foreign Pollution Fee Act in November 2023. This bill would impose a carbon tariff on imports, and both of its cosponsors are Republicans.

How do the bills compare?

Each of these bills proposes to cover some key materials – aluminum, cement, iron and steel, and fossil fuels, plus a few other products. The Clean Competition Act would impose a price of $55 per ton of extra carbon dioxide in both imported and domestic covered products, above the average amount of carbon it takes to make that product in America. 

The Foreign Pollution Fee Act would take a more complicated approach, tasking scientists with performing economic modeling to find the most effective price for each product from each country to create enough incentive to reduce their carbon emissions to match those of U.S. industries, while minimizing the added costs to American consumers. The FAIR Act is a bit different, estimating the costs for American companies to meet the regulations that reduce their carbon pollution, and applying that cost to foreign competitors to balance the playing field.

Each bill includes measures intended to exempt developing nations from some or all of the carbon price, to avoid damaging the economies of poorer countries that are not responsible for causing the climate crisis. The Clean Competition and FAIR Acts would use the carbon fee revenue to help reduce carbon pollution further. The Foreign Pollution Fee Act does not specify how to use the revenue, which is an area where CCL believes the bill could be improved.

What’s next in Congress?

Representatives from both parties will now need to negotiate what a bipartisan bill would look like to gain enough votes to pass. This process may take a long time, and it would be smart and prudent to pass the PROVE IT Act in the meantime to begin the process of calculating domestic and foreign industry carbon content differences while lawmakers iron out the other details of the bill.

Encouragingly, the PROVE IT Act is scheduled to be marked up in the Senate Environment and Public Works Committee later this week. If you live in a state with a senator on this committee (those states are Alaska, Arizona, Arkansas, California, Delaware, Maryland, Massachusetts, Michigan, Mississippi, Nebraska, North Dakota, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Vermont, West Virginia and Wyoming), then your senator needs to hear from you! Use our action tool on CCL Community to give them a call today — encourage them to support the PROVE IT Act when it comes up for a committee vote.

If you’re not in those states, you’re doing the right thing by continuing to learn about this legislation and the general topic of CBAMs so you’re prepared for when it’s time to engage on these topics. In the meantime, you can collect endorsements of CBAMs along with carbon fee and dividend and permitting reform.