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The US is examining a potential carbon pricing system on imports among a “range of options”, its most senior climate diplomat said, in what would be a key policy shift as it looks to combat Chinese industrial competition and cut emissions.
John Podesta said the US would fight against “freeriding” by foreign producers of carbon-intensive industrial imports, in an interview with the Financial Times in London.
“We’re not going to just give up our industrial base to people who are dumping carbon and freeriding on a system that doesn’t account for, and in fact, kind of subsidises the dumping of high carbon production cost into open markets,” he said.
Podesta took over the role of US climate envoy from John Kerry earlier this year, after leading the rollout of the Biden $369bn clean energy push under the landmark Inflation Reduction Act signed almost two years ago.
“The global trading system doesn’t properly take into account the embodied carbon in tradable goods,” he said. “So we’re undertaking a review of that, trying to deepen the data that we are going to need to implement a policy framework for that.”
Podesta, who announced a task force for climate and trade in April, said the data it gathered would be factored into the policy considerations.
“We need to decide what we’re going to do about this question on carbon in the tradable goods sector, particularly steel and aluminium, cement, glass, fertiliser, et cetera,” he said.
The increased US focus on the fallout for its industrial sector from trade in carbon-intensive products comes as the EU rolls out its carbon border adjustment mechanism (CBAM), a tariff aimed at imports such as cement and steel. China is also considering expanding its carbon permit pricing system, from presently very low levels for emissions allowances granted to industry.
“What we need is to move towards a global trading system that is going to push towards clean,” Podesta said. “The specific policy mechanism that we will adopt needs to fairly reflect the carbon that is embodied in the goods being produced.”
While there was “no decision about what the specific policy mechanism looks like” yet, he said there was a “bipartisan conversation about how we tackle this question” taking place in the US.
Lawmakers from both sides have put forward proposals targeting carbon-intensive sectors in recent years. Republican senator Bill Cassidy and Democrat Sheldon Whitehouse are among those calling for a carbon tariff that allows the US to take advantage of its less carbon-intensive goods while making foreign producers pay for their dirtier products.
A report from the Niskanen Center last year found that the US industry was much less carbon-intensive than some of the world’s largest emitters, such as China, India and Russia, but lagged behind the EU.
Podesta also defended the US launch of tariffs this year on Chinese electric vehicles and solar panels, and addressed the concerns that the protectionist moves could result in a slowdown of the green transition.
He argued China dominated important clean energy sectors such as batteries and the critical minerals needed for electrification because of “non-market practices”, and through the heavy use of polluting coal for the production of goods such as steel.
“We have to have a stable market for these products and industries. And I think that if you create a system that has short-term benefits, but a long-term vulnerability, you haven’t created stability in the transition.”
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