White House withholds support of Democratic carbon border tax

The White House is withholding support for a Democratic proposal to impose a pollution tax on imports from China and other countries, casting doubt on whether Democrats will be able to deploy what environmentalists consider one of the greatest weapons to tackle global climate change in a massive spending bill this year.

The United States is the closest it has ever been to imposing a carbon border tax - which seeks to level the playing field between US companies which face environmental regulations at home and foreign competitors with less rigorous standards - after Democrats included the proposal in their $3.5 trillion reconciliation package last week that they hope to pass along party lines by mid-September.

US President Joe Biden and top members of his administration have said publicly they support a carbon border tax as a tool to advance climate goals, but the White House has not endorsed the Democratic proposal, spearheaded by longtime Biden ally Senator Chris Coons.

The tax, as outlined by lawmakers, would raise billions by levying a tariff on carbon-intensive imports, but leaves specific details up to the Biden administration.

The White House is concerned the Democrats’ proposal will raise prices on a host of consumer goods, from cars to appliances, and conflict with Biden’s pledge not to tax any American earning less than $400,000 per year, according to two sources familiar with the discussions.

The White House is also worried any tax that raises prices could fuel Republican attacks that his policies are driving up inflation, they say.

The White House plans to withhold support as the US Treasury and other administration officials try to coordinate tax policy with trading allies like the European Union, which recently announced its own carbon border tax.

“We believe that carbon border adjustments in relation to carbon-intensive goods represent a potential, useful tool. We do not have a comment on any specific proposals at this time,” a White House official said.  “We will continue to engage with Congress, our partners around the world, and other stakeholders, including workers and domestic industry, on this issue.”

The idea of a carbon border tax was aimed at helping rich countries retain manufacturing jobs and investment that have gone for decades to lower-regulation countries, and encourage other countries to also price carbon and drive down emissions.

The EU’s tax, proposed last month to go into effect in 2026, was the world’s first.

It is also considered a way to keep American companies whose manufacturing processes emit heavy amounts of carbon pollution from relocating to countries with looser environmental rules, a phenomenon known as leakage.

The US economy lost almost a third of its manufacturing jobs from 2000 to 2010, as China emerged as a low-cost manufacturing superpower.