US examines carbon pricing on imports, climate envoy says

The US is exploring the implementation of a carbon pricing system on imports as a means to combat rising Chinese industrial competition and reduce emissions. This potential policy shift was announced by John Podesta, the US’s senior climate diplomat, in an interview with the Financial Times. He highlighted the need to prevent “freeriding” by foreign producers of carbon-intensive goods, stating that the US would not let its industrial base be overtaken by countries that produce carbon-intensive goods at a lower cost and without accounting for the carbon emissions involved.

Podesta took over the role of US climate envoy from John Kerry earlier this year, and he discussed the importance of a review of the global trading system’s failure to properly account for the embodied carbon in tradable goods. This review is intended to deepen the data required to implement a policy framework for this issue.

A task force for climate and trade, announced by Podesta in April, will gather data to be used in policy considerations. The focus will be on carbon-intensive sectors such as steel, aluminum, cement, glass, and fertilizer.

The increased US focus on trade in carbon-intensive products coincides with the EU’s rollout of its carbon border adjustment mechanism (CBAM), a tariff aimed at imports like cement and steel. China is also considering expanding its carbon permit pricing system, although the emissions allowances granted to industry are currently very low.

Podesta emphasized the need for a global trading system that pushes towards clean production and pointed out that the specific policy mechanism is yet to be decided. However, there is reportedly a bipartisan conversation about how to address this issue in the US.

In response to concerns that the proposed tariffs could slow the green transition, Podesta defended the US tariffs on Chinese electric vehicles and solar panels. He argued that China dominates important clean energy sectors due to non-market practices and the heavy use of polluting coal for the production of goods like steel, jeopardizing the stability of the green transition.

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