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Opinion
Peter R. Orszag

The U.S. Makes Carbon Pricing More Complicated Than It Needs to Be

What happens when a country that’s unwilling to impose a direct tax on emissions decides to assess the carbon content of imports?

How much should carbon emissions add to the price of steel?

How much should carbon emissions add to the price of steel?

Photographer: Doug Kanter/Bloomberg

As the November climate conference in Glasgow approaches, debate over the value of carbon “border adjustment” mechanisms in many countries is picking up. Most puzzling is a U.S. approach proposed in Congress.

A border adjustment is a fee that a country would impose on the quantity of carbon embodied in imports. The idea is to mitigate “leakage” of emissions toward countries with looser climate policies, and encourage those countries to adopt stricter ones. Where countries differ in the stringency of their efforts to lower emissions, the mechanism can push toward lower emissions everywhere. And it can discourage counterproductive shifts in the location of polluting industries.