The Case for a Carbon Border Fee 

By Jazz Lewis, Legislative Director

Manufacturing has long been celebrated as the backbone of the United States’ middle class, offering pathways into high-skill, good-paying jobs and sustaining millions of families across the nation. As of 2022, the sector employed over 12.7 million U.S. workers. The core of our manufacturing economy is the production of energy-intensive primary goods such as steel, aluminum, and cement—which are essential to producing the materials and components needed for clean technology and infrastructure.  

These goods produce significant emissions. In the global context, manufacturing heavy industry goods accounts for over 21% of global greenhouse gas (GHG) emissions. Addressing these emissions is crucial to meeting both U.S. and global climate commitments. 

The Biden administration—supported by a coalition of stakeholders including the BlueGreen Alliance (BGA)—recognizes the dual imperative of bolstering domestic manufacturing—and the good jobs that come with it—while simultaneously reducing industrial emissions. Significant strides have been made through legislation such as the Bipartisan Infrastructure Law and the Inflation Reduction Act, which facilitate industrial decarbonization through direct investments and tax incentives. But, further action is necessary to lower industrial GHG emissions. 

A promising strategy to achieve these dual goals of reducing emissions while investing in U.S. clean manufacturing is the implementation of a carbon border fee. This fee would be applied to imported industrial products that have a higher carbon intensity than their domestic equivalents, effectively rewarding domestic production manufactured under stronger environmental and labor regulations. Such a measure would discourage the offshoring of production to countries with weaker environmental and labor standards—a practice known as “carbon leakage”—which not only undermines global environmental efforts, but also threatens critical U.S. manufacturing jobs. Carbon border fees prevent companies from taking short cuts on environmental protections and incentivize countries and firms to produce cleaner industrial materials and products. We can grow and maintain good jobs here in the United States and reduce climate emissions because facilities in the United States continue to be cleaner than much of the world. 

A carbon border fee serves multiple functions. By aligning a border fee with Buy Clean policies, we can send a consistent market signal domestically and abroad that there is a financial incentive to reduce emissions from carbon-intensive industry. Given that the United States is one of the largest importers of goods in the world, it would encourage non-U.S. producers to decarbonize their industries to gain better access to the U.S. market. The fee also leverages the U.S. “carbon advantage” in industries in which our manufacturing is cleaner. For instance, the average ton of steel produced in China emits more than twice the GHGs of steel produced in the United States. This disparity is echoed across various sectors where U.S. production processes are cleaner than those of many other major producers.  

Research by Ali Hassanbeigi underscores this point, highlighting that about 100% of imported steel and 66% of imported aluminum originates from countries with higher average CO2 emissions per ton than those manufactured in the United States. With one of the lowest CO2 emissions intensities for steel production globally—and similarly competitive figures for aluminum—our country is well-positioned to benefit from policies that favor cleaner production methods. 

The concept of a carbon border fee has bipartisan support in Congress, evidenced by two legislative proposals introduced in late 2023. Sens. Bill Cassidy (R-LA) and Lindsey Graham (R-SC) put forward the Foreign Pollution Fee Act, and a group of Democratic lawmakers, including Sens. Sheldon Whitehouse (D-RI), Martin Heinrich (D-NM), and Brian Schatz (D-HI), and Reps. Suzan DelBene (D-WA), Kathy Castor (D-FL), Don Beyer (D-VA), and Ami Bera (D-CA) introduced bicameral versions of the Clean Competition Act. While these bills differ in detail, both aim to curb the relocation of production to regions with subpar environmental and labor standards and spark a broader conversation on how to craft an equitable and effective carbon border policy. 

In addition to ongoing congressional discussions, the Biden administration also recognizes the opportunity to connect climate and trade to support U.S. workers and incentivize trading partners to reach our climate goals. In mid-April, the White House announced the creation of  a Task Force on Climate and Trade. This task force will integrate climate considerations into U.S. trade policies and work with international partners to align global trade practices with climate objectives.  

BGA views a well-designed carbon border fee as an essential tool for protecting U.S. jobs and manufacturing competitiveness while also contributing to the global fight against climate change. By encouraging cleaner industrial practices worldwide, this policy not only helps align market dynamics with environmental imperatives, but also supports U.S. workers and businesses.