U.S. Takes Another Important Step Towards Improved Climate and Trade Policy

Building on last year’s momentum, the United States announced an important step towards developing smart climate and trade policies.

Today, John Podesta, senior advisor to President Biden for international climate policy, spoke about the need for “a global trading system that slashes pollution, creates a fair and level playing field, protects against carbon dumping, supports good manufacturing jobs and economic opportunity, and rewards every country that’s doing the right thing—no matter their stage of development.” To accelerate the transition toward climate-smart trade policies, the Biden administration announced the formation of a new White House Climate and Trade Task Force. This task force will have three priorities:

  1. Develop climate and trade policies that effectively address carbon leakage, carbon dumping, and embodied carbon in general.
  2. Ensure we have credible, robust, and granular data to implement climate and trade policies.
  3. Identify additional actions to allow domestic and foreign producers to thrive.

The announcement represents a new articulation of how the Biden administration views international trade through a climate lens. This was previously seen through the negotiations between the United States and the European Union on the Global Arrangement on Sustainable Steel and Aluminum, which seeks to establish the first carbon-based sectoral trade arrangement on steel and aluminum. And most recently seen in a communication to World Trade Organization (WTO) members calling for an enhanced focus on trade-related climate measures.

More broadly, there is growing bipartisan interest for action among U.S. policymakers in climate and trade policies. While Democrats and Republicans have varying reasons for their interest in climate and trade policies, the overlapping considerations are economic competitiveness and support for domestic manufacturing. Recent research indicates that U.S. manufacturers are able to produce the same goods with a lower overall carbon intensity than developing and emerging economies, giving the United States a clear “carbon advantage.”

There is also interest in embodied emissions of globally traded goods, which make up nearly a quarter of global carbon dioxide emissions in 2019. Closing this “carbon loophole” — whereby countries reduce their own emissions by importing goods from countries that emit more — represents a significant opportunity to reduce global emissions. However, there are no readily available carbon-intensity metrics to prove that U.S. goods are cleaner, let alone standard methods for calculating embodied emissions across countries.

Ensuring reliable, transparent data about the carbon intensity of trade goods is necessary for allowing producers to harness the growing market and consumer demand for low-carbon products. Moreover, federal agencies are already collecting the data required to calculate carbon-intensity metrics for some goods, most notably through buy-clean initiatives. Bringing together these disparate agency efforts would make it easier for the federal government to calculate carbon-intensity metrics and make the resulting data available to consumers and producers. It’s important to note that carbon intensity metrics on their own do not establish a border carbon adjustment, but provide the foundation for a potential carbon border adjustment mechanism.

From the perspective of climate action, a top priority should be ensuring that climate and trade policies actually achieve good outcomes for the climate, in the form of significant emissions reductions. Domestically, that means doing more than just favoring cleaner U.S. manufacturers: it also means policies that reduce industrial emissions here at home. Internationally, we can enhance international cooperation by creating a fair and level playing field, accelerating climate action, and rewarding those who are leading on action. Working with all international partners, we can explore opportunities presented through smart climate trade policies to reduce global emissions.

Today’s announcement on climate and trade policies is exciting. A new C2ES paper provides an update on the latest policy developments, international and domestic, along with key considerations on the policy design of a carbon border adjustment mechanism. As discussions around climate and trade policy continue to heat up, it’s crucial that we are operating from a common understanding about the key issues at play.

At C2ES we will continue working with Congress, the administration, international partners, companies, and other stakeholders to help build bipartisan support for smart climate policies that ensure greater domestic ambition alongside international partnerships that can drive global emission reductions.