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Think Tank: US Isn't Leader in Clean Steel or Other Industrial Production

A think tank with roots in libertarianism that now supports a carbon tax warned that members of Congress who want to pass a carbon border adjustment tax without a domestic carbon tax face more than just litigation at the World Trade Organization.

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Shuting Pomerleau, an analyst at the Niskanen Center, wrote that while U.S. manufacturing is greener than manufacturing in India, China and Russia, it is much more carbon-intensive than its competitors in Japan, the EU or the U.K. in most sectors.

"Enthusiasm for these measures has grown as the EU moves closer to implementing its own carbon border adjustment (CBAM)," Pomerleau wrote. The CBAM will initially just be reporting; duties don't begin until 2026 (see 2308170033). The products originally covered by the measure don't include major exports from the U.S. (see 2212130056), but chemicals and plastics are expected to be included later on.

She noted that some in Congress have criticized the CBAM, which will put the same price on carbon on imports that its domestic producers pay. She said that Sen. Kevin Cramer, R-N.D., wrote in a recent Wall Street Journal opinion piece: “The CBAM as drafted would disadvantage the U.S., especially our small businesses and manufacturers, even though the U.S. and EU have nearly identical environmental performance and emissions standards."

That's not true, Pomerleau wrote in the paper published Sept. 14. The EU's industrial sector is 40% less carbon intensive than that in the U.S.; Japan is 30% less carbon intensive; and the U.K. is 60% less carbon intensive.

Canada, Mexico and South Korea are similar in their industrial carbon footprint, the paper said.

Still, there is some truth to the senators' arguments, as China is twice as polluting and India three times as polluting as U.S. producers.

While punishing China is appealing to Congress, she noted, it's not effective in reducing global emissions. She said that the goods that China exported to the U.S. in 2018 were only 4% of China's overall greenhouse gas emissions. More than 80% of its emissions were for domestic consumption.

Moreover, "imposing tariffs on more carbon-intensive imports without implementing a domestic carbon tax provides little incentive for U.S. producers to further decarbonize their production processes," the paper said.

The Office of the U.S. Trade Representative is trying to negotiate a deal with the EU under which U.S. and EU steel (and perhaps steel from some other countries with better carbon footprints) will be treated similarly, while dirtier steel -- and steel produced in non-market-based conditions -- is either kept out or is more expensive.