John Podesta, President Biden’s climate czar, recently suggested that a carbon border tax could be proposed during the second term of the Biden administration.
A carbon border tax involves levying taxes on imports based on their estimated greenhouse gas emissions. Given the interconnected nature of the global economy and the presence of foreign components in most consumer products, a tariff targeting greenhouse gas emissions on imports essentially functions as a tax on everything. As we have pointed out in numerous places, the brunt of this energy tax would be borne by the American people, particularly the most vulnerable: the impoverished, the elderly, and individuals on fixed incomes as the costs of taxes on imported goods will ultimately be passed to them.
Furthermore, carbon border taxes are susceptible to political manipulation due to the complexities involved in assessing the true carbon intensity of products sourced from various countries with differing regulatory frameworks. The sheer complexity of rating products would create massive compliance costs that would raise the cost of doing business throughout the economy.
The effort to impose a carbon border tax is being aided by some Republican members in the Senate as last June Sen. Kevin Cramer (R-ND) and several other Republican senators introduced legislation to establish the administrative framework needed to implement such a tax called The PROVE IT Act.
The PROVE IT Act assigns the Department of Energy (DOE) the task of creating a comprehensive report evaluating the greenhouse gas (GHG) emissions linked to various product categories to determine their average emissions intensity domestically and internationally. While proponents may portray it as a straightforward data-gathering initiative, the legislation marks the first step towards gathering crucial data for potential carbon taxes and tariffs in the United States. It grants the DOE broad discretion in methodology, paving the way for rent-seeking and intense lobbying efforts from affected industries, which will ultimately skew the report’s findings as accurately measuring and quantifying GHG emissions presents significant challenges. GHG emissions measurement is inherently imprecise, with virtually all human activities contributing. Additionally, the Act’s focus on establishing an average emissions intensity for national products overlooks regional variations in emissions within the vast United States, which can affect companies differently. Expectations of calculating emissions profiles for other nations are also overly optimistic, given potential data limitations and cooperation issues, particularly from countries like China. Despite acknowledging these challenges, the Act mandates the DOE to compile a report, potentially flawed and incomplete, for regulatory and taxation purposes.
Currently, it appears that Rep. John Curtis (R-UT) is seeking cosponsors for a House version of the PROVE IT Act. While it’s no shock to witness Democrats embracing policies prioritizing climate change without much heed to cost or efficacy, it’s disheartening to witness Republicans aiding them in this endeavor. A faction within the Republican Party is eager to impose protectionist trade policies that might benefit a small number of companies in their districts. These Republican members know energy taxes are not popular, so they have obscured their efforts to hike energy prices behind rhetoric about being tough on China. In the process, they are finding common ground with a segment of the Democratic Party that is focused on supporting climate action in any form. Together, both groups are very willing to pass the costs of those policies onto the rest of us.
In December, the American Energy Alliance and the Committee to Unleash Prosperity released a survey on voter attitudes toward climate and energy policies, and we posed this question to 1,600 likely voters in eight swing states: “How much are you willing to pay annually to address climate change?” The median response was $10 per year. Surprisingly, over one-third of respondents, including 17 percent of surveyed Democrats, expressed unwillingness to pay anything at all. Moreover, when confronted with the prospect of a proposed tax on imported goods, voters displayed a resounding opposition, with nearly a 2-1 margin against it. This sentiment was echoed across the board, with a widespread consensus emerging that the federal government should refrain from imposing measures that increase the cost of energy, exacerbate inflation, or escalate taxes on energy. Carbon border taxes do all of that.
Previous instances have shown that tariffs did not meet their intended goals, including revitalizing protected industries, maintaining job opportunities, and improving environmental results. These are identical aims outlined by supporters of carbon border taxes, and there’s little evidence to suggest outcomes will vary at present. Republicans should heed this: the American people reject new energy taxes.