Climate Advisers reviews the EU’s new Carbon Border Adjustment Mechanism and the potential economic and political implications of a US response.

The EU is planning to impose a carbon fee on imports of carbon-intensive goods, such as steel, iron, cement, fertilizer, aluminum, and electricity. The EU’s motivation with the Carbon Border Adjustment Measure (CBAM) is to protect the environmental integrity of its climate action by discouraging so-called “carbon leakage” (the movement of manufacturing from one country to the next to escape climate regulations). The EU’s proposal is for the CBAM to be a pilot through 2025 before being fully implemented in 2026. The EU’s CBAM has received increased attention recently due to a leaked draft of the EU’s plans and the official proposal being released on July 14. This has come at a sensitive time for the Biden administration. President Biden, the greenest president in U.S. history, says he supports a CBAM for the United States, which would help the United States align itself with the EU and advance climate action. But President Biden has not made the issue a priority, a CBAM does not yet have majority support from Congress, and the issue could complicate international climate talks ahead of COP26.

Without a counter move from the United States, the EU’s tax on U.S. goods could raise costs for certain U.S. industries and workers. In response to the EU, the Biden administration and CBAM supporters in Congress are taking a measured and deliberate approach to CBAMs for the time being, with Democrats proposing a tariff on carbon-intensive imports to go in the infrastructure bill. This section looks at the affected sectors of an EU CBAM, the current US politics on a CBAM, and what measures the Biden administration and CBAM supporters can take domestically and internationally before a coherent US border adjustment policy is put in place.

Dive into this brief to learn more about the stakeholders involved in the debate, sectors that could be most affected, and President Biden and Congress’ potential responses to the new EU proposal.