Who is afraid of the EU's carbon border adjustment plan?
Op-ed by David Kleimann and William Eacho, The Hill, October 13, 2021
A specter is haunting the policy elite in Washington. It’s the carbon border adjustment mechanism, known as C-BAM, created by the European Union’s executive to complement the bloc’s emission trading scheme (ETS).
C-BAM, in a nutshell, would charge importers of steel, aluminum, iron, fertilizer, cement and electricity the equivalent of the EU’s domestic carbon price. This adjustment would, according to the plan, prevent the migration of domestic production to polluter havens abroad as the EU’s carbon price is set to rise in the years to come. This common-sense approach to climate change has generated worries not only among the governments of notoriously non-abating economies of Russia, Turkey, South Africa and the likes but also, somewhat curiously, the United States.
Critics contend the C-BAM would put U.S. manufacturers at a competitive disadvantage relative to EU producers while the U.S. is still developing its climate and trade policies. What’s more, the EU’s legislative proposal has raised fears in Washington that the scheme could be expanded to include more products soon after it takes effect in 2023. Projecting these anxieties, President Biden’s special climate envoy John Kerry fired a rhetorical warning shot across the Atlantic in March, noting that a carbon border tax would “have serious implications for economies, and for relationships and trade.” Many U.S. policymakers have suggested delaying implementation for at least two years, so the U.S. has time to shape its climate solutions.
A leak of the EU’s draft proposal in June added to U.S. trade irritations. The document said that importers to the EU could credit carbon tax or EU-style cap-and-trade carbon costs paid in the country of origin but made no mention of the possibility of crediting (U.S.) businesses’ “implicit” carbon costs, such as adaptation to environmental regulations.
In one of the more moderate reactions to the plan’s details, U.S. Treasury Secretary Janet Yellen supported C-BAMs in general but stressed that such mechanisms should credit indirect carbon costs, too. Other American commentators were quick to conclude that the Europeans aimed to "punish the U.S." and were trying to force her hand to adopt a carbon taxation policy. To counter the perceived threat, Sen. Chris Coons (D-Del.) and Rep.Scott Peters (D-Calif.) introduced bills that would impose an “import polluter fee.” The legislation would exempt imports from less-developed nations and from countries whose climate regulations are at least as stringent as those of the U.S. and that do not impose a border carbon tax on American products.
Such responses reflect misconceptions of a C-BAM’s anticipated operation and projected impacts on U.S. and other countries’ exports. In fact, the scheme could help the U.S. achieve its climate objectives and benefit U.S. industry at the same time. Accordingly, the proposal deserves support from the U.S., which should see it as a sincere invitation to cooperate on alignment of transatlantic carbon border adjustment policies — after the U.S. has adopted a carbon tax, that is.
Any American who is wary of the EU’s proposal should focus on three realities:
1) The C-BAM is laser-focused on actual greenhouse gases (GHG) emitted in the production process, and U.S. producers are highly carbon competitive internationally.
2) U.S. industry will gain a competitive edge from C-BAM vis-à-vis major exporters of steel, iron, aluminum and fertilizer to the EU, such as Russia, Turkey and Ukraine.
These non-abating economies emit, on average, two to four times more GHG per unit than their U.S. counterparts.
3) The EU has decided not to open the Pandora’s box of calculating the price equivalents of regulations. That process would be riddled with mind-blowing methodological difficulties and would set imprecise incentives.Op-ed by Francis Rooney and William Eacho, The Hill, June 23, 2021William Eacho, the Obama-era U.S. ambassador to Austria, said he interpreted McCoy’s comments to mean Exxon Mobil is “far more concerned about an increase in the corporate tax rate than they are with paying carbon fees, so that also makes sense to me.”
In the midst of Capitol Hill’s struggle to fashion climate policies that will meet the steep challenge facing our planet, the EU’s C-BAM proposal is an opportunity rather than a threat and a cause for retaliation.
Carbon pricing is the most powerful policy tool we could apply to climate change
Excerpt from Huff Post, July 1st, 2021.
William Eacho, the Obama-era U.S. ambassador to Austria, said he interpreted McCoy’s comments to mean Exxon Mobil is “far more concerned about an increase in the corporate tax rate than they are with paying carbon fees, so that also makes sense to me.”
“It doesn’t change the fact that they do support carbon pricing, which is undoubtedly the most powerful policy tool we could apply to the climate challenge,” said Eacho, who co-founded the bipartisan Partnership for Responsible Growth, which supports a carbon tax. “So their opposition to other provisions may be real, but that doesn’t change their position on pricing. As to his comment that won’t happen, well, based on today’s political landscape he might be right, but we have not given up.”
Pricing carbon can help solve the infrastructure funding dilemma
Op-ed by Francis Rooney and William Eacho, The Hill, June 23, 2021
When will Congress address our most pressing challenges? Another severe hurricane season is expected, our western states are bracing for more deadly wildfires and currently suffering the worst drought on record, and rising sea levels already threaten coastal neighborhoods. Climate change is real, occurring right now, and decisive action is needed — but the partisan Congress has so far proved unable to address the issue.
Senators from both Republican and Democratic parties have announced support for an infrastructure package, but are unable to agree on how to fund it. We have a bipartisan solution: price carbon. The industries that polluted our environment should bear the burden of cleaning it up and as the coal industry fades away, why make taxpayers, instead of the energy companies, pay to retrain displaced mine workers?
Putting a price on carbon will level the economic playing field in the energy sector, unlock market-driven innovation, and lead to the deployment of low, zero and negative carbon technologies. It will help create millions of new jobs and slash U.S. carbon emissions dramatically, making it a powerful tool for curbing climate pollution.
The European Union (EU) is planning to tax imports based on the amount of their greenhouse gas emissions, which would add a fee to the price of products shipped to Europe by U.S. companies. This plan has caught the attention of American manufacturers. “Our clients are seeing this as an additional call to action to look at decarbonizing their supply chains,” the Boston Consulting Group’s Tim Figures told The Wall Street Journal. “It sits alongside investor and ethical pressure by actually putting a value on the carbon contained in imports.”
What’s the smartest step that Congress can take? More than 3,500 economists, including 28 Nobel laureates and several past chairmen of the President’s Council of Economic Advisors and most American CEO’s recommend enactment of a carbon tax.
The word “tax” scares many politicians from embracing this common-sense solution. Some might argue that a fee on carbon emissions would have a regressive impact on consumers’ electricity and gasoline costs but this is easily mitigated. Rebating 50 percent of the tax proceeds would negate the impact on low- and moderate-income households and a portion of the proceeds could be directed to communities whose economies are tied to coal in order to facilitate their inevitable transition to new sources of employment as we shift to cleaner, less expensive energy.
A carbon fee would reduce emissions across the economy, and using the tax as a disincentive is a free market solution, which is much better than a new regimen of government regulations. It would do far more to reduce greenhouse gas emissions than a much-discussed clean energy standard, which would deal only with the electric power sector and have no impact on transportation, agriculture, buildings and manufacturing. Those sectors account for three-quarters of U.S. emissions.
Under WTO rules a carbon fee also would enable the United States, as well as the EU countries and others, to impose a border fee on goods from countries that fail to price carbon emissions. This type of border adjustment would significantly enhance the competitiveness of U.S. manufacturers in competition with products from coal-dependent economies (like China).
Yet another benefit of a carbon fee is the revenue it would generate. Even after rebates to make low- and moderate-income families whole and a portion to communities in transition, the remainder could help fund the infrastructure investments that politicians of both major parties broadly support.
Are there enough votes on Capitol Hill to enact a carbon fee? One of us sponsored a bill calling for such a fee, and the other of us has spent much of the past six years meeting with members of Congress to explain its merits. Many of them have said that they are open to the idea and just need to see enough political movement to convince them that the time is right.
In a March poll by the Yale Program on Climate Change Communication, a majority of registered voters said that global warming should be a high or very high priority for the President and Congress. In recent months powerful organizations such as the U.S. Chamber of Commerce and the Business Roundtable, as well as scores of large companies, have signaled support for carbon pricing.
History will not look kindly on a major nation with a history of being a world leader that fails to address such a profound threat to global prosperity and health. The time has come to price carbon.
Francis Rooney is a former Ambassador to the Holy See, and Republican congressman representing Florida’s 19th District. William Eacho, former U.S. Ambassador to Austria, is co-founder and CEO of the nonprofit Partnership for Responsible Growth. Rooney is a member of the group’s Advisory Board.
The Hartford Courant, letter to the editor, Aug. 28, 2019
As the hottest month in recorded history drew to a close, U.S. Rep. John Larson, D-Ct., wasn’t just turning up the A/C. He was trying to do something to slow the warming of our planet, introducing a bill (H.R. 4142) that would tax carbon pollution. An overwhelming majority of economists say that this is the fastest, most efficient way to speed the transition from fossil fuels to clean energy.
This bill would generate $2.3 trillion over 10 years, with about half going toward another major national priority: shoring up our failing infrastructure. The tax proceeds also would fund clean energy research. To protect lower-income and middle-class Americans from increases in the cost of electricity and gas, Larson’s bill calls for rebates.
Our nation must move as quickly as possible to limit intense heat waves, superstorms and the rising sea levels that threaten coastal communities. During my time in Congress, I developed a respect for John Larson’s reasoned, bipartisan approach to lawmaking. His common-sense solution to climate change would put the free market to work and merits support from both sides of the aisle.
Walt Minnick, Boise, Idaho
Co-founder, Partnership for Responsible Growth
Best Way to Fight Climate Change? Put an Honest Price on Carbon
The New York Times, Editorial, Oct. 29, 2018
Excerpt
In the words of George Frampton, a senior environmental adviser to Bill Clinton and co-founder of a group that favors carbon taxes, Partnership for Responsible Growth, it’s an overdue stab at “honestly pricing carbon,” which industry has until now been able to hurl into the atmosphere pretty much for free.
The New York Times, letter to the editor, June 11, 2018
Re “The Silver Lining of Leaving Paris” (editorial, June 2):
While everyone on the planet should be grateful that various American states and cities are taking responsibility for fighting global warming, the world’s richest country must simply find the will to enact a national solution.
The quickest, most efficient and most potent solution, according to economists, is a carbon fee. Since air pollution, climate change and other problems are caused by burning carbon, the price of carbon should include the costs that those problems impose on all of us and on our economy.
If Congress put a fee on carbon emissions, the free market would accelerate the shift toward sources like solar and wind power. And one price for carbon would make much more sense than a variety of prices set by states.
Such a fee would generate a sizable revenue stream, enabling investments in our ailing infrastructure or other priorities. Some of the proceeds could be rebated to low- and middle-income households to cover slightly higher energy costs.
Can Congress deliver? The percentage of Republican voters who want action is rising, particularly among younger generations. And half of the 78 House members who have joined the Climate Solutions Caucus are Republicans.
It’s time for the G.O.P. to take its conservation flag out of hiding and run it back up the pole.
William C. Eacho III, Washington
Co-founder, Partnership for Responsible Growth
An Opportunity for President Trump to Lead
Council of American Ambassadors, American Ambassadors Review, Spring 2018
Excerpt
In an increasingly complex world, a carbon fee is refreshingly simple. If Congress were to adopt the fee as envisioned by the nonprofit Partnership for Responsible Growth, the U.S. Treasury would impose the levy on all fossil fuels—coal, oil and natural gas—when they leave the well or mine or enter the refinery. The added cost no doubt would be passed along the line to the end user, like almost any cost of doing business. So to compensate low- and middle-income households for slightly higher energy bills, a portion of the fee’s revenue should be returned in the form of a dividend or rebate.
William C. Eacho III, Washington
Co-founder, Partnership for Responsible Growth
Making the price of carbon more honest
The Washington Post, letter to the editor, Feb. 15, 2018
A Pigouvian tax. That’s the common-sense response to Fred Hiatt’s plea in his Feb. 12 op-ed, “Don’t celebrate the budget deal. It imperils America,” that Congress “fund” the nation’s priorities. Such a levy, named for British economist Arthur Pigou, is intended to correct an inefficient market outcome.
We subsidize the burning of carbon. We all pay later for lung cancer, asthma, heart disease and the lost productivity resulting from these diseases. Its price does not include the costs of more frequent and more intense hurricanes, wildfires and other natural disasters that climate change is exacerbating.
By honestly pricing carbon, we could accelerate the inevitable transition to clean energy and reduce carbon’s increasingly high costs to society. Doing so would provide a second benefit: A $49-per-metric-ton fee, increasing by 2 percent a year over inflation, would generate $2.1 trillion over 10 years. Even after rebating a portion of that to lower- and middle- income households to compensate them for slightly higher energy costs, there would still be more than $1 trillion left to reduce the fast-rising national debt and address our infrastructure needs.
George T. Frampton Jr., Washington
Co-founder, Partnership for Responsible Growth
Maine is not as vulnerable as Florida, but the toll of climate change will still be high
Bangor (Maine) Daily News, Op-ed, Jan. 30, 2018
Opening paragraphs:
We may not be as vulnerable as our friends in Florida, but Mainers are likely to pay a heavy toll as the climate continues to change. A recent climate assessment by federal scientists concluded that the largest increase in intensity and frequency of heavy precipitation will be in the Northeast.
Sea levels already have risen 7 to 8 inches globally since 1900, with 3 inches of that probably since 1993. That is a rate not seen in any century for at least 2,800 years. The Northeast has and will experience sea level rise greater than the global average, scientists say.
William C. Eacho III, Washington
Co-founder, Partnership for Responsible Growth
Traverse City (Michigan) Record-Eagle, Letter to the editor, Oct. 24, 2017
Wildfires, hurricanes, droughts, heat wave. It’s time to take action on climate change, and residents of Michigan’s largest congressional district should be pleased that their representative in Congress, Jack Bergman, has just joined the House Climate Solutions Caucus. He is the first member from Michigan.
Many people think that all Republicans are climate change skeptics. In fact, half of the 60 members of this caucus are Republicans.
Their interest in this challenge reflects growing concern in the party. For example, 62 percent of Trump voters support taxing and/or regulating the pollution that causes global warming, according to a Yale survey, and that was before Hurricane Harvey hit Houston.
If we are to make significant progress on climate change, this caucus will have to provide some of the leadership.
We hope that Congressman Bergman can help persuade his colleagues to engage in the art of compromise that legislators are paid to perform. Here’s one idea for this fall: To pay for tax cuts, enact a carbon fee to accelerate the shift to clean energy.
George T. Frampton Jr., Washington
Co-founder, Partnership for Responsible Growth
The Washington Post, letter to the editor, June 25, 2017
The No. 1 reason that a carbon fee (or tax) has political potential is that it offers Congress flexibility. Lawmakers could opt for the Shultz and Summers’s proposal and treat all their constituents to a quarterly dividend. Or they could use the sizable revenue such a fee would generate to reduce the high corporate tax rate or some other tax. Yet another option is to plow that money into infrastructure, aid for coal-dependent communities, clean energy and other priorities.
Like Congress, the business community can also see value in such a fee, as illustrated by the support of General Motors, ExxonMobil, Procter & Gamble and other major corporations. Its simplicity, efficiency and reliance on the free market make a carbon fee superior to other climate-change solutions, and business executives are not in denial about the changing climate. Let’s hope that the business community will use its influence to convince Congress that pricing carbon is not only good for Americans’ health but is also smart economics and smart politics.
William C. Eacho III, Washington
Co-founder, Partnership for Responsible Growth
Renewables, carbon tax feel the love at D.C. March
E&E Daily, May 1, 2017
Excerpt
Marchers carried tiny wind model turbines to the White House on Saturday, along with banners supporting solar energy, carbon taxes and pipeline resistance.
Conservatives who are calling for action on climate change will launch a series of TV ads running in D.C. this week to highlight the threat posed by warming. Sponsored by the Partnership for Responsible Growth, the ads urge both parties in Congress to protect America from climate change and "remind our nation's leadership that time is not on our side," according to a media advisory.
The Washington Post, letter to the editor, Jan 29, 2017
If the president is open to taking the advice in Todd Stern’s Jan. 25 op-ed, “The deal of the century on climate,” he should do so by pursuing the one option that would also help him deliver on tax reform and infrastructure. That option is a carbon fee, which a large majority of economists (and our incoming secretary of state) say is the quickest, most efficient and most potent solution to climate change. If Congress finally puts a price on carbon emissions, the free market will drive down the use of carbon. That’s what Canada is doing.
For our dealmaker in chief, the bait is the money that would come pouring in. If we adopted a fee of $35 per metric ton (MT) of carbon dioxide, with annual increases of inflation plus 4 percent, it would generate $1.5 trillion to $2 trillion over 10 years. That would go a long way toward paying for infrastructure, tax cuts — and maybe even part of that border wall.
The U.S. national debt held by the public equals nearly $12 trillion. That’s sobering enough. Now the Congressional Budget Office is predicting that it will soar by $8.6 trillion over the next 10 years.
As global temperature records continue to be topped, a carbon fee is a simple way to help us achieve several goals. It represents the kind of old-fashioned, bipartisan compromise that our elected officials are paid to hammer out.
George T. Frampton Jr., Washington
Co-founder, Partnership for Responsible Growth
The Washington Post, letter to the editor, Nov. 6, 2016
If letter-writer Blane Morse wants to give nuclear power a boost, he should be singing the praises of a carbon tax instead of criticizing it [“Nuclear power, not a carbon tax, can stop global warming,” letters, Nov. 1]. Today, nuclear power is not cost-competitive in part because we subsidize fossil fuels, which do not cover their external costs. Impose a carbon fee at a significant level ($30 or more) to remove that subsidy, and nuclear would become competitive again.
Cigarette taxes and gasoline prices are just two examples of how consumption declines when items cost more. Mr. Morse claimed that there’s no evidence that a carbon fee works, but British Columbia has had one since 2008 and has seen emissions decline. Our new Congress and president should follow British Columbia’s example, price carbon and put the free market to work to rationalize our energy choices, strengthen our economy and combat climate change.
William C. Eacho III, Washington
Co-founder, Partnership for Responsible Growth
Climate change: 5 reasons why the U.S. should enact a carbon fee
Minneapolis Star Tribune, Op-ed, June 10, 2016
The paper is piling up at the U.S. Court of Appeals for the D.C. Circuit. The Environmental Protection Agency’s Clean Power Plan is in the cross hairs of half the states, and judges are plowing through briefs filed by more than 1,000 trade associations, lawmakers, advocacy groups and others with a point of view.
You may hate the EPA rule. Or you may love it. Maybe you have no opinion at all. But almost all of us could probably agree on one thing: There must be a simpler, quicker and more effective way to fight climate change.
In fact, there is: a revenue-neutral carbon fee.
Such a fee has many advantages.
First, it would give every American and every company doing business in this country a clear incentive to reduce consumption of coal, oil and other fossil fuels that are increasing global warming and contributing to a host of serious problems, including drought and the spread of diseases such as the Zika virus.
Second, a carbon fee of $35 per ton would generate more than $150 billion of revenue per year, half of which could be used to reduce the U.S. corporate income tax — now the highest in the industrialized world (an uncompetitive 35 percent) — to 25 percent. The other half could be used to reimburse low- and lower-middle-income earners for slightly higher energy costs. (A $35 per ton fee translates to 33 cents per gallon of gas.)
Third, carbon fees work. The province of British Columbia has had one since 2008. The tax has reduced fossil-fuel consumption by 9 percent, while use in the rest of Canada has risen. Meantime, British Columbia’s GDP growth has outperformed that country’s.
Fourth, even if the Clean Power Plan survives court challenges, it will not do enough to enable the U.S. to meet its pledge at December’s conference in Paris. And all of the pledges made there, if fulfilled, will not stop the global temperature from rising above the 2-degrees-Celsius goal. But a revenue-neutral carbon fee would enable our country to meet the Paris pledge and would even put us in a position to contribute our full share to the carbon-dioxide reduction needed to keep the temperature rise below 2 degrees.
Fifth, a revenue-neutral carbon fee would be much simpler and easier to implement than a cap-and-trade system or the Clean Power Plan. In fact, it would greatly reduce — or eliminate — the need to use EPA regulations at all. Such regulations could change constantly, thus creating uncertainty that would inhibit business investment. A carbon fee is a market solution, not a regulatory solution.
Could such a fee pass Congress? I think so, and here’s why. Recently I had a chance to sample congressional reaction. I sat down with 10 members of Congress or their aides to explain why this former businessman believes that this is the smartest idea out there.
I was accompanied by representatives of the Partnership for Responsible Growth. This nonprofit began work last year to promote adoption of a carbon fee that not only would counter climate change but also would promote growth via tax reform. This group has now conducted more than 200 such visits, mostly with Republicans. The bottom line: A sizable majority of these members of Congress are open to this creative compromise, as long as business and opinion leaders back home are on board. I urge Minnesota’s business leaders to tell the 10 Minnesotans on Capitol Hill that it is time to act.
There are signs that public opinion is moving in this direction. A survey by three GOP pollsters in September showed that 54 percent of conservative Republicans would support a carbon fee if the proceeds were rebated.
The recent finding by a scientific report that sea levels are likely to rise much faster than previously believed — perhaps by 5 or 6 feet over the next 85 years — injects even more urgency to the task facing us. Let’s put a price on carbon, at long last, and put our faith in the free market to carry us to a healthier, more prosperous future.
Roger Parkinson
Advisory Board, Partnership for Responsible Growth
Carbon Pricing and Climate Change
The New York Times, letter to the editor, Jan. 25, 2016
Not only are states, provinces and countries putting a price on carbon, but so are many companies.
More than 430 major companies — including General Motors, Stanley Black & Decker and Colgate-Palmolive — are now using an internal price on carbon for internal planning and to make investment decisions, according to C.D.P. (formerly the Carbon Disclosure Project). More than a thousand companies worldwide, including most major hydrocarbon companies, are doing this or have pledged to do so within two years.
Rather than stand by while businesses and states price carbon individually, Congress should enact a revenue-neutral carbon fee. The proceeds could be used to fund long-overdue tax reform, cutting taxes for business and reimbursing lower-income families for paying a few cents more at the pump.
Our nonprofit has spoken with 175 members of Congress, or their aides, and there is bipartisan openness to considering this idea after the election. Most want to know that their business leaders back home are on board. Those opinion leaders need to deliver the message to Congress that this is the cheapest and fastest way to reduce dangerous emissions.
Walt Minnick, Boise, Idaho
Co-founder, Partnership for Responsible Growth
The New York Times, letter to the editor, Oct. 1, 2015
Kudos to Siemens for adopting an ambitious plan to eliminate carbon from its global operations. But what can the United States do to improve the carbon-reduction performance of companies that do not follow Siemens’s lead?
The quickest and most efficient solution is to turn to the free market and enact a carbon fee.
To overcome Republican opposition in Congress, use half of the revenue generated to reduce our corporate tax rate (the highest in the industrialized world) to 25 percent. The balance could be returned to low- and middle-income families to offset their slightly higher energy costs.
More than 40 countries have adopted some form of carbon pricing. British Columbia’s revenue-neutral carbon fee has reduced fossil fuel emissions by 16 percent, while emissions in the rest of that country have risen 3 percent. Meantime, British Columbia’s growth outperforms Canada’s.
Our nonprofit has briefed more than 175 senators and representatives, or their aides, and found great interest in this kind of bipartisan solution. The climate-change challenge grows by the day, so we urge Congress to act promptly.
George T. Frampton Jr., Washington
Co-founder, Partnership for Responsible Growth