Foreign Pollution Fee Act - 119th Congress (S.1325)
The motivation behind the Foreign Pollution Fee Act is to protect cleaner U.S. manufacturing from moving to high carbon-emitting countries, such as China. To do so, the bill would impose a “foreign pollution fee” on a select group of imports, but it specifically states that nothing in the measure constitutes a domestic carbon tax. The fee would vary based on the covered product’s pollution intensity, which is calculated based on a national weighted average and the country of origin to ensure that imports are not dirtier than U.S. products.
Bill Explainer
The Foreign Pollution Fee Act seeks to impose a border fee on the emissions of select carbon-intensive imports with the primary goal of protecting cleaner U.S. manufacturing from moving to high carbon-emitting countries like China. The bill specifically states that no provisions create any form of a carbon tax, fee, price, or other measure for products produced domestically.
Sectors covered by the foreign pollution fee are aluminum, cement, glass, hydrogen, iron & steel, solar components, and battery inputs. The bill includes exemptions for countries with whom the U.S. has an international partnership agreement and for certain products necessary to meet national security needs. There is also a mechanism to allow U.S. entities to petition to have their pollution intensity reconsidered.
The bill’s fee would vary based on the covered product’s pollution intensity and country of origin. Pollution intensity will take into account the direct, indirect, precursor, and transportation emissions of the associated production. The fee does not apply to U.S. producers, while the fee will double for nonmarket economies and foreign entities of concern. Foreign producers are not treated individually; pollution intensity is instead calculated based on a national weighted average. The initial fees for each country and each product are laid out in a table in the bill text
Once the fee has been in effect for 36 months, products will be organized into tiers based on their respective pollution intensity. The fee assigned to products within each tier is outlined below:
Tier | Pollution Intensity | Variable Charge
Tier 1 | 10-20% above baseline | 5-25%
Tier 2 | 20-200% above baseline | 25-80
Tier 3 | >200% above baseline | 80% plus one percentage point for each percentage point above 200% of baseline pollution intensity
The bill would establish an Advisory Committee on Global Pollution Challenges, which would be composed of representatives from national laboratories, industry representatives from covered sectors, and the research community, to provide data to help the Department of the Treasury. Treasury would be responsible for issuing the rulemakings, and the Advisory Committee would give recommendations on rulemakings and reassessments.
About the sponsors
Sen. Bill Cassidy (R-LA)
Cassidy is the senior senator from Louisiana and has served since 2015. He sits on the following Senate Committees: Energy and Natural Resources, Finance, and Veterans’ Affairs; and he chairs the Senate Health, Education, Labor, & Pensions Committee.
Rationale
Cassidy’s bill is the first Republican-led carbon border measure bill and he is trying to garner support from members of his caucus who are concerned such a measure would serve as a pathway to a domestic carbon tax. To assuage these fears, Cassidy introduced a resolution in 2023 on the economic harms of taxing domestic carbon emissions (S.Con.Res.23). He has publicly called for stakeholder input on the bill, which has since gone through several iterations, in order to find a more palatable approach to his caucus and constituencies. The bill has been criticized on the grounds that the failure to establish a corresponding domestic carbon tax violates international trade rules, but Cassidy has contended that his measure doesn’t violate trade rules because countries can avoid the fee by raising their environmental standards. He also clarified the measure addresses World Trade Organization compliance concerns by "equalizing imports with U.S. production" or not treating imports less favorably than U.S. production.
Frequently asked questions
What is the goal of this bill?
The goal of the bill is to impose a fee on the emissions of U.S. imports to support cleaner U.S. producers competing against high carbon-emitting countries, like China.
What industries would be affected?
The products covered by this bill are aluminum, cement, glass, hydrogen, iron & steel, solar components, and battery inputs.
Does the bill provide exceptions or carveouts?
Yes, certain products necessary to meet national security needs would be exempt, and countries with whom the U.S. has an international partnership agreement can reduce their fee if they commit to reducing their pollution intensity in the covered goods.
Does the bill impose a domestic carbon tax?
No. In fact, the bill specifically states that no provisions create any form of a carbon tax, fee, price, or other measure for products produced domestically.
Which government agency would administer the bill?
The bill would establish an Advisory Committee on Global Pollution Challenges, composed of representatives from national laboratories, industry representatives from covered sectors, and federal agency representatives, to calculate carbon intensity and provide recommendations for rulemakings. The Department of the Treasury would be responsible for issuing the rulemakings.
