“Prove It” Act Lays the Groundwork for a Carbon Tariff

Recently, the issue of a carbon tariff has been getting a lot of attention. This is true both in Congress and abroad as the European Union just instituted its own carbon border tax earlier this year. In the U.S., there has been talk of instituting a similar policy for a while now, with advocates in both the Republican and Democratic party. Call it a “carbon tax,” a “carbon border tax,” “carbon pricing” or a “carbon tariff,” but for consumers, it simply means making everything cost more via a hidden tax politicians can use to spread around for their political priorities. You can probably guess that you aren’t on that list.

For Democrats, the carbon tax and carbon tariff are vehicles to further “climate action,” which they seem to favor in any form and at any cost. For some Republicans, the concept is a way to restrict trade while simultaneously punishing China, which has lower environmental standards than the United States. What the China hawks fail to acknowledge is that tariffs imposed by the U.S. government aren’t borne by international producers, but by domestic consumers. In many ways, it acts like inflation, which erodes the buying power of consumers. And hiding “climate action” or “leveling the playing field,” does not change the fact that we all will be paying more for our energy, which has already been eating away at our household budgets for several years now. 

The most recent effort is the Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency Act of 2023 or the “PROVE IT Act. The bill is authored by Republican Senator Kevin Cramer (ND) and Democratic Senator Chris Coons (DE). This bill’s stated objective is to direct the Department of Energy to publish a study identifying the emissions intensity of various industrial products both domestically and from countries that are trading partners of various types or who control substantial global market share for a product. The study would also seek to identify any issues with verifying emissions intensity, and would compare U.S. intensity to that of other countries.

This idea sounds benign. After all, what is wrong with a study, say the authors. The problem is this administration’s track record on producing accurate information free from their climate bias is problematic at best. Given that, the idea that the report would use objective metrics to determine carbon emissions is dubious. Rather, it would almost certainly be used to justify carbon pricing, which the Administration already supports. 

Let’s take the social cost of carbon, for example. The social cost of carbon is a metric established by the Obama administration and brought back under President Biden that estimates the purported economic damages associated with CO2 emissions. It sounds good in theory, but the model used has been shown to be incredibly easy to manipulate, rendering its conclusion useless, while giving cover to the Administration to justify vastly expensive new regulations. 

The PROVE IT act would act in a similar way by legislating the creation of a study that was handmade for the purpose of raising prices on American consumers. It is also unnecessary since studies on the relative carbon dioxide intensities of other nations already exist. 

Ultimately, tariffs are not a tax on foreign producers, but on domestic consumers. In the case of a carbon tax, they simply reflect the Biden Administration’s view and compliance with their voluntary re-entry into the Paris Accords, which have never been subjected to a treaty vote by the U.S. Senate, which is constitutionally responsible in such matters. Companies always pass their costs onto their customers, and so, as with all other tariffs, the ones ultimately holding the bill for a border-adjusted carbon tariff would be you and me. Our reliance on Chinese minerals and other industrial products is certainly a concern, but raising the prices we pay for energy intensive goods is not the solution to that problem. This is especially true for things we don’t make in sufficient quantities such as the critical minerals that the Biden Administration has kept us from developing. A tax on imports will only serve to exacerbate our existing trade issues without presenting meaningful solutions to our domestic mining issues that actions like permitting reform and quicker approvals would help to alleviate. It’s difficult to understand how our government could justify taxing things from abroad while simultaneously denying us the ability to produce them at home. 

Furthermore, you can’t have a border adjusted tax without a domestic carbon tax. That’s just how the international trade rules work. So even if you support a border tax, but not a domestic carbon tax, we are eventually going to get one anyway.

If Senator Cramer wants to promote American industry, then he should look for options other than trade protectionism in the form of carbon tariffs or other taxes. In the short run, carbon tariffs may confer some advantages to some parts of American industry, but in the long run, policymakers will only harm those businesses by shielding them from the competitive pressures of foreign competition in a global market. That competition encourages innovation and efficiencies that benefit the industry itself as well as consumers. Along the way, American consumers will be harmed as they pay more for goods and services as the costs of tariffs are ultimately passed along to them. Americans are waiting to build pipelines, open mines, and produce energy to compete with China, but our elected leadership has failed to open avenues for them to pursue that work. 

A better approach to promoting American industry would be to focus on reducing burdensome regulations here in the U.S. that raise the cost of doing business and make it harder for American industry to compete with countries like India and China. In the energy sector, a good place to start would be to work on overturning the over 150 actions the Biden administration and Democrats have taken that have raised energy prices by making it harder to produce oil and natural gas here in the U.S. Likewise, they could reverse their animosity towards mining in the U.S. that has foreclosed access to the minerals their “green energy policies” are demanding we use. 

Americans do not need new taxes of any kind. It will only make their lives harder. The PROVE IT act is the beginning of a road that will end in both a tax on imports and a domestic energy tax. If Senators Cramer and Coons want to tax our energy, they should be more transparent about it and bring a carbon tax to the Senate floor for a vote. But they won’t because they know that it would be dead on arrival.

Contact your legislators through the form below and let them know what you think about their efforts to bring a carbon tax to America.