US Republicans in pro-climate policy shock

Carbon pricing is back on the US legislative agenda

Back in March I semi-seriously suggested a pro-climate populist manifesto, outlining four ways in which populist tactics could be employed for the good of the planet. They were: elite hypocrisy; conspiracy and grievance; nationalist protectionism; and short-term financial self-interest.

Already, pro-climate nationalist protectionism has made its way onto the US legislative agenda. The Foreign Pollution Fee Act, a bill proposed in April by Republican Senators Bill Cassidy and Lindsey Graham, aims to impose fees on imported goods based on their greenhouse gas emissions. Functioning effectively as a carbon border adjustment mechanism, those fees would protect American firms from foreign competitors with lower emissions standards by levelling the playing field.

I don’t know nearly enough about the political realities of today’s US Congress to even guess at the bill’s chances of success. To be honest, I’m not holding my breath. What’s important is that it puts carbon pricing back on the national legislative agenda at a time when many would least expect it.

There are a few reasons to follow the bill’s passage over the coming months:

First, by pricing in the domestic carbon-competitive advantage the USA enjoys over most nations (particularly China), the bill has the potential for bipartisan support. That’s a vanishingly rare thing these days. It’s a measure driven by naked national interest, but the result would be meaningful progress in terms of factoring in the economic costs of carbon into global system of trade.

Second, the bill underlines the reality that carbon border adjustment mechanisms (such as those being implemented by the EU and the UK), despite recent adjustments to simplify the rules, are not going away. That provides even more incentive for other countries to accelerate implementation of their own carbon taxes, so as not to lose potential tax revenue to export destinations.

Third, the bill suggests a fascinating potential pathway for the US to tactically retreat from the current administration’s “emergency” tariffs to a more rational and international rules-based approach. In fact, focusing on carbon emissions would cement the common ground that should exist between developed economies like the UK, EU and Canada while continuing to level the playing field with lower cost and less regulated markets. That’s assuming, of course, that at some point the US will seek a more rational and international rules-based approach.

Lastly, beyond the current economic nationalism that’s dominating the US agenda, the fact that climate-positive (in effect) legislation has been introduced by Republicans is also a reminder that carbon pricing as a concept is not inherently left- or right-wing. It has something for everyone. For the left, it’s a systemic approach to address climate change by fixing a huge “negative externality” problem with the free market. And for the right, when coupled with a consumer dividend, it minimises big government and puts the power of individual choice back into the hands of businesses and consumers.

For climate campaigners, policymakers and politicians pretty much anywhere, that’s a unique proposition. One with the potential to win a whole lot of public support across the political spectrum.