America's Clean Future Fund Act - 118th Congress (S. 5107)

The America’s Clean Future Fund Act seeks to increase investment in the clean energy economy. The bill would impose an initial carbon tax, referred to in the bill as a carbon fee, of $65 per metric ton on high-emitting domestic producers and a corresponding carbon border fee adjustment to ensure American companies remain on a level playing field with foreign competitors. The carbon fee on domestic producers would increase every year that emissions targets are not met. The bill first imposes fees on domestic covered fuels and imports of carbon-intensive products. Two years later, other high-emitting domestic facilities would be subject to the fee. The bill would also create a new federal agency that would be responsible for financing.

Bill explainer

The America’s Clean Future Fund Act includes carbon trade provisions that aim to reduce emissions by establishing both a domestic carbon fee and a carbon border fee adjustment as part of a more comprehensive package to increase investment in the clean energy economy. The domestic fee would apply to fossil fuel producers at first, and the border fee would apply to certain carbon-intensive products, such as aluminum, cement, and chemicals, as well as imported fuels. The Secretaries of Commerce and Energy could also subject more products to the border fee if they are determined to be energy-intensive and trade-exposed. Two years after the initial imposition of these taxes, they would begin to apply to the carbon dioxide and methane associated with the production, processing, and transportation of energy and industrial products.

Starting in 2026, the domestic tax would be set at $65 per metric ton of carbon, increasing by $10 annually, adjusted for inflation. Imports would face an equivalent fee, adjusted for any domestic carbon tax the exporter may pay in its country of origin. The Secretaries of the Treasury, Commerce, and Energy would also be tasked with developing rules to determine whether certain policies in foreign countries that reduce emissions without taxation should be treated as carbon taxes for the purpose of calculating the import fee.

Countries with conflicting treaties would be able to seek adjustments to the fee based on those agreements, while companies who deploy carbon capture, utilization, and sequestration and exporters of carbon-intensive products would be eligible for refunds. Fossil fuel exporters would also be able to seek refunds on taxes paid on the use, sale, or transfer of the fuel.

The bill describes a process to establish declining emissions targets for covered and noncovered fuels. In addition to creating a methodology for measuring these admissions, the Board of Directors of the Climate Change Finance Corporation, which is established in the bill, would be required to submit annual reports on the progress made toward meeting emissions targets. If cumulative emissions targets are not met, the fee would increase by $15 each year for the first four years, then $20 per year for the next ten years, maxing out at $25 per year after 2043.

Every five years, the National Academy of Sciences would be required to develop a report on the measure’s effectiveness at reducing emissions.

The revenue generated by the fees would be distributed by America’s Clean Future Fund, a trust fund created in the bill under the jurisdiction of the Department of the Treasury, to a range of relevant activities. These include providing rebates for agricultural decarbonization, assistance for communities impacted by the energy transition, and funding for the Climate Change Finance Corporation.