Cassidy Says He's Aiming for Carbon Border Tax for Next Congress

Sen. Bill Cassidy, R-La. believes that a way to preserve the economic benefits of chemical plants and also fight climate change is to impose a carbon border adjustment tax on certain goods.

In response to a question from International Trade Today, he said that his office is "kind of halfway in that process" of educating constituents and colleagues about the concept of a carbon border adjustment tax. He said he's talking with Sen. Sheldon Whitehouse, D-R.I., who has introduced legislation along these lines, but said he won't be introducing his own version this year. "I'd like to think it can happen next Congress," he said.

He said he'd like to have at least 10 Democrats and 10 Republicans on his bill at introduction, "because that shows that in an evenly divided Congress ... that you're able to get something through." He said he's already heard from some Republican senators who are intrigued.

Cassidy said he also needs to get the executive branch on board, and he has not started those discussions.

About 15% of Louisiana's economy is in oil and natural gas. Cassidy knows this very well, but as he noted at a Climate Leadership Council webinar, "My state has lost more land mass to rising sea levels than any other state."

Globally, 30% of greenhouse gas emissions are from industrial processes, but in Louisiana, two-thirds of the greenhouse gas emissions in the state are industrial, primarily from chemical plants and oil refineries.

Cassidy said using carbon border adjustment taxes can appeal to many sectors of the American electorate -- climate hawks, those concerned with threats from China, those who want to protect the industrial base.

"It's not just climate, it's national security, it's economic development, it's Western Hemispheric development, it's closer ties with our allies. And then you start broadening the coalition. And the [carbon boarder adjustment mechanism] CBAM gets at that. And it gets that from the left and from the right," he said.

"If what we do [to fight climate change] undermines support from a large swath of Americans -- making some poor -- there's going to be a public revolt," he said.

The Office of the U.S. Trade Representative and EU are discussing how to create a barrier to dirtier steel and aluminum imports in their markets, but the CLC argues that chemicals, more than steel, aluminum and cement, need to be on policymakers' radar screens. Fertilizer is on the list of goods that will be subject to the EU's carbon border adjustment mechanism (CBAM), but other chemicals, such as benzene, toluene, polyethylene and polypropylene are not.

The CLC's Center for Climate and Trade published a study Sept. 13 that looked at the greenhouse gas emissions for those five bulk chemicals. Benzene is used to make artificial fibers, pesticides, detergents and more; toluene is used for paints and paint thinners; the last two are the most common inputs for plastics.

Catrina Rorke, executive director of the Center for Climate and Trade, said the global trade in chemicals is nearly three times larger than global trade in iron and steel and cement combined. She said that the U.S. is the second-largest producer of chemicals in the world, and that chemicals are its largest category of exports.

Although there are 70,000 discrete chemical products made in the U.S., she said, fewer than a dozen bulk chemicals are the building blocks of those products, and bulk chemicals creation is the most carbon-intensive step of production.

Among the categories Rorke analyzed, the U.S. is 10% to 40% more carbon efficient than its global competitors, she said. The study said the U.S. has the lowest-emission production of benzene and toluene, and is tied with the EU on ammonia and polypropylene. The EU has cleaner processes for making polyethylene.

CF Industries CEO Tony Will, whose company is one of the biggest producers of ammonia, also spoke during the webinar, and said a third of his company's greenhouse gas emissions are from nitric acid production, a third from the fuel used in making the chemical and a third is the carbon dioxide that is a byproduct of the process. Some of that is used to make urea, another fertilizer, and some of it is vented.

CF Industries has committed to reduce its operational emissions by 25% by 2030, but he said the flue gas capture costs are only economical if there's a $150/ton price for carbon. There's not support in Congress for a domestic price on carbon, but Will said that with a carbon border adjustment tax and other incentives, "we think we can get there."

He said that ideally, there would be a global cost on carbon, but since that's hard to imagine, a carbon border adjustment mechanism is necessary.