FAIR Transition and Competition Act - 117th Congress (S.2378, H.R.4534)
The FAIR Transition and Competition Act seeks to support American jobs and communities while tackling climate change by imposing a tariff, called a fee in the bill, on imported carbon emissions. By charging carbon-intensive products for their negative climate impacts, the bill seeks to level the playing field for U.S. manufacturers and incentivize greater investment in clean technologies. However, it stops short of imposing a domestic carbon tax. The bill would use different mechanisms to calculate the fee for fuels and products, and if there is no available data for a specific fuel or product, then the cost would be calculated based on sector-wide emissions. The revenue generated by the border adjustment would go toward grant programs and research to support the deployment of clean technologies.
Bill explainer
The FAIR Transition and Competition Act seeks to support American jobs and communities while tackling climate change by imposing a fee on imported carbon emissions. Initially, covered goods include fuels — such as natural gas, petroleum, coal, and their derivative products — and aluminum, cement, iron, steel, and finished products made up of at least 50 percent of material from those sectors. The list of covered products would expand over time as the U.S. improves its processes for determining the carbon intensity of different types of goods.
Carveouts are granted for least developed countries, as identified by the Organisation for Economic Co-operation and Development, and for countries who do not impose a carbon border adjustment measure on U.S. products and have ambitious greenhouse gas reduction laws.
The border fee is determined by multiplying the domestic environmental cost, as determined by the Department of the Treasury (Treasury), with the greenhouse gas emissions associated with the production of the covered fuel or good, as determined by the Environmental Protection Agency (EPA) and/or Treasury. Importers of covered goods may also submit a petition to revise the determination of greenhouse gas emissions for a specific good.
The Treasury Secretary, in coordination with the Environmental Protection Agency (EPA) Administrator, U.S. Trade Representative, and Homeland Security Secretary, are tasked with developing the regulations and guidance associated with implementing this bill.
The revenue collected from the carbon border fee would be used to supplement any U.S. Customs & Border Protection appropriations necessary to administer the fee. Any remaining revenue would be equally distributed toward a state grant program and toward activities supporting technologies that reduce and/or eliminate greenhouse gas emissions.
About the sponsors
Sen. Chris Coons (D-DE)
Coons is the senior senator from Delaware and has served since 2010. He sits on the following Senate Committees: Foreign Relations, Appropriations, Judiciary, and Small Business; and he is the Ranking Member of the Senate Ethics Committee.
Rep. Scott Peters (D-CA-50)
Peters has served in Congress since 2013. He is a member of the following House committees: Energy & Commerce and Budget. He is also the New Democrat Coalition’s Climate Task Force Chair and serves on a number of climate-focused caucuses.
Rationale
Upon introduction, Coons and Peters viewed this bill as a way to protect American workers while reducing emissions and increasing climate resilience. Since the 117th Congress when this bill was introduced, both have introduced different legislation related to carbon emissions and trade measures.
Frequently asked questions
What is the goal of the bill?
The goal of the bill is to promote a global race to the top to address climate change while supporting impacted communities.
What industries would be affected?
The carbon border measure would affect petroleum, natural gas, coal, aluminum, cement, iron, and steel.
Does the bill provide exceptions or carveouts?
Least-developed countries are exempt, as are countries that simultaneously do not impose a similar charge against U.S. exports and have ambitious greenhouse gas reduction laws.
Does the bill impose a domestic carbon tax?
No, the bill would not impose a domestic carbon tax.
Which government agency would administer the bill?
The Department of the Treasury would be responsible for administering the bill in partnership with the Environmental Protection Agency, the Department of Energy, the Department of Commerce, the Office of the U.S. Trade Representative, and the U.S. International Trade Commission.
