[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 2378 Introduced in Senate (IS)]
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117th CONGRESS
1st Session
S. 2378
To amend the Internal Revenue Code of 1986 to establish a border carbon
adjustment for the importation of certain goods.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 19, 2021
Mr. Coons introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish a border carbon
adjustment for the importation of certain goods.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fair, Affordable, Innovative, and
Resilient Transition and Competition Act'' or the ``FAIR Transition and
Competition Act''.
SEC. 2. BORDER CARBON ADJUSTMENT.
The Internal Revenue Code of 1986 is amended by adding at the end
the following new subtitle:
``Subtitle L--Border Carbon Adjustment
``Chapter 101--Border Carbon Adjustment
``CHAPTER 101--BORDER CARBON ADJUSTMENT
``Sec. 9901. Definitions.
``Sec. 9902. Determination of domestic environmental cost incurred.
``Sec. 9903. Determination of emissions for each sector.
``Sec. 9904. Border carbon adjustment.
``Sec. 9905. Administration of border carbon adjustment.
``Sec. 9906. Allocation of carbon border fee adjustment revenues.
``SEC. 9901. DEFINITIONS.
``For purposes of this subtitle:
``(1) Administrator.--The term `Administrator' means the
Administrator of the Environmental Protection Agency.
``(2) Baseline emissions.--The term `baseline emissions'
means the average greenhouse gas emissions of a company's
relevant sector, as determined under section 9903(a).
``(3) Benchmark emissions.--The term `benchmark emissions'
means the greenhouse gas emissions of the highest emitting
sites within a company's relevant sector in the United States,
as determined under section 9903(b).
``(4) Border carbon adjustment.--The term `border carbon
adjustment' means the fee imposed pursuant to section 9904.
``(5) CO<INF>2</INF>-e.--The term `CO<INF>2</INF>-e' means
the number of metric tons of carbon dioxide emissions with the
same global warming potential as one metric ton of another
greenhouse gas.
``(6) Covered fuel.--The term `covered fuel' means natural
gas, petroleum, coal, or any other product derived from natural
gas, petroleum, or coal that is used or may be used so as to
emit greenhouse gases to the atmosphere.
``(7) Covered good.--The term `covered good' means a
covered fuel or a product produced within a sector.
``(8) Domestic environmental cost incurred.--The term
`domestic environmental cost incurred' means the amount
determined under section 9902.
``(9) Greenhouse gas.--The term `greenhouse gas' has the
same meaning given such term under paragraph (3) of section 901
of the Energy Independence and Security Act of 2007 (42 U.S.C.
17321).
``(10) Greenhouse gas content.--The term `greenhouse gas
content' means the amount of greenhouse gases, expressed in
metric tons of CO<INF>2</INF>-e, which would be emitted to the
atmosphere by the use of a covered fuel.
``(11) Imported.--Irrespective of any other definition in
law or treaty, the term `imported' means to have landed on,
brought into, or introduced into any place subject to the
jurisdiction of the United States from a person or place
outside the United States.
``(12) Importer.--The term `importer' means a person who,
for any reason, brings a product from a foreign country into
the United States for consumption, use, or warehousing.
``(13) Production greenhouse gas emissions.--The term
`production greenhouse gas emissions' means the quantity of
greenhouse gases, expressed in metric tons of CO<INF>2</INF>-e,
emitted to the atmosphere resulting from the production,
manufacture, or assembly of a product, as determined under
section 9905.
``(14) Secretary.--The term `Secretary' means the Secretary
of the Treasury, or the Secretary's delegate.
``(15) Sector.--The term `sector' means industrial
facilities which produce one of the following products:
``(A) Steel.
``(B) Aluminum.
``(C) Cement.
``(D) Iron.
``(E) Any product identified pursuant to section
9905(e).
``(F) Any product for which greater than 50 percent
of the composition of such product consists of a
product described in subparagraphs (A) through (E).
``(16) State.--The term `State' means any of the 50 States,
the District of Columbia, or the Commonwealth of Puerto Rico.
``(17) Upstream greenhouse gas emissions.--The term
`upstream greenhouse gas emissions' means the quantity of
greenhouse gases, expressed in metric tons of CO<INF>2</INF>-e,
emitted to the atmosphere resulting from the extraction,
processing, transportation, financing, or other preparation of
a covered fuel for use, as determined under section 9905.
``SEC. 9902. DETERMINATION OF DOMESTIC ENVIRONMENTAL COST INCURRED.
``Not later than July 1, 2023, and annually thereafter, the
Secretary (in coordination with the Director of the Office of
Management and Budget, the Secretary of Commerce, the Secretary of
Energy, the Administrator, the Secretary of Agriculture, the Secretary
of Transportation, the United States Trade Representative, and the
Secretary of the Interior) shall determine the domestic environmental
cost incurred for each sector, and for the production of each covered
fuel, based on the average cost incurred by companies within such
sector (or, in the case of a covered fuel, the average cost incurred to
produce such fuel) to comply with any Federal, State, regional, or
local law, regulation, policy or program which is--
``(1) in effect at the time of such determination,
including any such law, regulation, policy, or program which is
implemented after the date of enactment of the FAIR Transition
and Competition Act, and
``(2) designed to limit or reduce greenhouse gas emissions,
including--
``(A) the Clean Air Act (42 U.S.C. 7401),
``(B) greenhouse gas emissions standards for
passenger cars and light trucks, and
``(C) any State, regional, or local law,
regulation, policy, or program that imposes a cap-and-
trade system with respect to, or a tax or fee on,
carbon dioxide.
``SEC. 9903. DETERMINATION OF EMISSIONS FOR EACH SECTOR.
``(a) Baseline Emissions.--Not later than July 1, 2023, and
annually thereafter, the Administrator shall determine and publish the
average greenhouse gas emissions of each sector during the prior
calendar year in order to demonstrate the amount of progress made in
reducing greenhouse gas emissions in the United States.
``(b) Benchmark Emissions.--Not later than July 1, 2023, and
annually thereafter, the Administrator shall determine and publish the
production greenhouse gas emissions for the top 1 percent of the
emitting production sites within each sector in the United States
during the prior calendar year.
``SEC. 9904. BORDER CARBON ADJUSTMENT.
``(a) Border Carbon Adjustment.--Beginning on January 1, 2024, in
the case of any importer that imports a covered good into the United
States, there shall be imposed a fee--
``(1) in the case of a covered fuel, in an amount equal to
the product of--
``(A) the domestic environmental cost incurred in
the production of such fuel, multiplied by
``(B) the upstream greenhouse gas emissions of such
fuel,
``(2) in the case of a product produced within a sector
which is not a covered fuel, in an amount equal to the product
of--
``(A) the domestic environmental cost incurred for
the sector in which such product was produced,
multiplied by
``(B) the production greenhouse gas emissions of
the product, or
``(3) in the case of a product produced within a sector for
which reliable data with respect to the production greenhouse
gas emissions of such product is not available, in an amount
equal to the product of--
``(A) the benchmark emissions for the sector which
produced such product, multiplied by
``(B) the domestic environmental cost incurred for
the sector in which such product was produced.
``(b) Exemptions.--
``(1) In general.--Not later than July 1, 2023, and
annually thereafter, the Secretary shall publish an annual
report which identifies all applicable countries, with any
covered good imported from an applicable country during the
calendar year beginning after the date of publication of such
report to be exempt from the border carbon adjustment.
``(2) Applicable countries.--For purposes of this
subsection, the term `applicable country' means--
``(A) any country included on the list of Least
Developed Countries on the most recent Development
Assistance Committee List of Official Development
Assistance Recipients published by the Organisation for
Economic Co-operation and Development, and
``(B) any country which--
``(i) does not impose a border carbon
adjustment on products produced or manufactured
in the United States, and
``(ii) the Secretary (in coordination with
the Secretary of State, the United States Trade
Representative, the Secretary of Commerce, the
Secretary of Energy, the Administrator, the
Secretary of Agriculture, the Secretary of
Transportation, and the Secretary of the
Interior) determines enforces laws and
regulations designed to limit or reduce
greenhouse gas emissions that are at least as
ambitious as Federal laws and regulations
designed to limit or reduce greenhouse gas
emissions.
``SEC. 9905. ADMINISTRATION OF BORDER CARBON ADJUSTMENT.
``(a) In General.--The Secretary (in consultation with the
Administrator, the United States Trade Representative, and the
Secretary of Homeland Security) shall prescribe regulations and
guidance to implement the border carbon adjustment.
``(b) Methodology.--In determining the production greenhouse gas
emissions of a covered good, the Secretary shall use reliable
methodologies which--
``(1) as may be necessary or convenient--
``(A) distinguish between different types of
covered fuels,
``(B) distinguish between a covered fuel's
greenhouse gas content and that covered fuel's upstream
greenhouse gas emissions,
``(C) distinguish between the different types of
greenhouse gas emissions which compose a covered fuel's
upstream greenhouse gas emissions, as well as the
various processes which produced those emissions, and
``(D) distinguish between the different types of
greenhouse gas emissions which compose a covered good's
production greenhouse gas emissions, as well as the
various processes which produced those emissions,
``(2) ensure that no covered good has the border carbon
adjustment imposed upon it more than once, and
``(3) are consistent with international treaties and
agreements, including free trade agreements.
``(c) Petition Procedure.--The Secretary shall establish fair,
timely, impartial, and, to the extent necessary, confidential
procedures by which the importer of any covered good may petition the
Secretary to revise the Secretary's determination of the production
greenhouse gas emissions of that importer's covered good.
``(d) International Negotiations.--The Secretary of State and the
United States Trade Representative shall engage with other countries
regarding reducing global greenhouse gas emissions through trade and
ensuring fairness in the application of emissions-based tariffs.
``(e) Additional Sectors.--The Secretary (in consultation with the
Director of the Office of Management and Budget, the Secretary of
Commerce, the Secretary of Energy, the Administrator, the Secretary of
Agriculture, the Secretary of Transportation, the Secretary of the
Interior, and the United States Trade Representative) shall, for
purposes of section 9901(15)(C), annually identify any product for
which the Secretary determines--
``(1) there is reliable data for determining the production
greenhouse gas emissions of such product, and
``(2) that it is in the interest of the United States to
include such product under section 9901(15) for purposes of
application of the border carbon adjustment with respect to
such product.
``SEC. 9906. ALLOCATION OF CARBON BORDER FEE ADJUSTMENT REVENUES.
``With respect to the revenues collected under section 9904--
``(1) such revenues shall be used to supplement
appropriations made available in fiscal year 2024 and each
fiscal year thereafter to U.S. Customs and Border Protection,
in such amounts as are necessary to administer the border
carbon adjustment, and
``(2) from any amounts remaining following any supplemental
appropriation made with respect to amounts described in
paragraph (1)--
``(A) 50 percent of such amounts remaining shall be
used to provide grants to States as prescribed in
section 3 of the FAIR Transition and Competition Act,
and
``(B) 50 percent of such amounts remaining shall be
available, as provided by appropriation Acts, for
making expenditures to support the high-impact
research, development, demonstration, technology
transfer, commercialization, and export of technologies
that reduce or eliminate greenhouse gas emissions.''.
SEC. 3. RESILIENT COMMUNITIES GRANT PROGRAM.
(a) In General.--The Secretary shall provide to each State a
Resilient Communities Grant no later than April 1, 2025, and each
calendar year thereafter, in an amount determined under subsection (c).
(b) Eligible Purposes.--A State receiving a Resilient Communities
Grant under this section shall use the amount of each such grant as
follows:
(1) To provide job training and worker transition
assistance, with priority given to workers and former workers
in fossil fuel-related industries.
(2) To assist municipalities, counties, or other political
subdivisions of the State in--
(A) developing climate vulnerability assessments
and adaptation plans to help build resilience to rapid-
onset and slow-onset climate hazards; and
(B) implementing such plans, which may include but
are not limited to such projects as climate-smart
infrastructure, agricultural climate solutions, and
natural climate solutions to build climate resilience
and support carbon sequestration.
(3) To directly assist frontline communities who are
experiencing the earliest, most severe threats from climate
change with technical assistance and resources to undertake
efforts to build climate resilience.
(4) Alleviate historical burdens imposed upon communities
of color, low-income communities, Tribal and Indigenous
communities, fossil fuel-dependent communities, and other
vulnerable populations that have been historically under-
resourced due to inequities in resource allocation or
disproportionately burdened by environmental hazards, including
exposure to climate risks and polluted air, waterways, and
landscapes.
(5) To provide relocation assistance to individuals and
populations when climate change or the energy transition
threatens their health, well-being, or livelihood.
(6) To assist small businesses that are disproportionately
impacted by the border carbon adjustment imposed under subtitle
L of the Internal Revenue Code of 1986 (as added by section 2
of this Act).
(c) Amount of Grant.--
(1) In general.--The amount of the Resilient Communities
Grant made to any State for any calendar year shall be equal to
the product of--
(A) the total amount made available under section
9906(2)(A) of the Internal Revenue Code of 1986 (as
added by this Act) based on revenue collected in the
prior calendar year; and
(B) the State allocation percentage for the State
(as determined under paragraph (2)).
(2) State allocation percentage.--Not later than December
1, 2024, and each calendar year thereafter, the Secretary (in
coordination with the Administrator of the Environmental
Protection Agency, the Secretary of Commerce, the Secretary of
Labor, the Secretary of Homeland Security, the Secretary of
Transportation, the Secretary of Agriculture, and the Secretary
of Energy) shall establish the formula for determining the
State allocation percentage for the following calendar year,
which, for each State, shall take into account--
(A) the percentage of the population of the United
States residing in such State;
(B) the vulnerability of such State to climate
change; and
(C) the percentage of the total United States
workforce employed in fossil fuel-related industries
who are employed in such industries in such State.
(3) Climate vulnerability.--In accounting for the
vulnerability of each State to climate change under paragraph
(2)(B) for the purposes of determining the State allocation
percentage, the parties identified in paragraph (2) shall--
(A) at a minimum, consider the potential risks from
rapid-onset and slow-onset climate hazards to--
(i) human health and safety;
(ii) infrastructure and other physical
assets; and
(iii) natural and agricultural systems;
(B) account for the disproportionate impact of
climate change on socially vulnerable communities;
(C) ensure the methods for determining climate
vulnerability do not result in a formula for State
allocation that inequitably allocates resources to
specific communities based on race, socioeconomic
status, or other such characteristics; and
(D) utilize relevant components of existing metrics
and indicators of climate vulnerability in the United
States wherever possible, including but not limited
to--
(i) the FEMA National Risk Index; and
(ii) over the past 5 years, the State's
proportion of--
(I) National Flood Insurance
Program claims;
(II) Fire Mitigation Assistance
Grants; and
(III) USDA fast track drought
designations.
(4) Minimum state allocation.--For purposes of subparagraph
(B), the State allocation percentage for any State shall not be
less than 1 percent.
(5) Verification.--The Secretary shall verify the State use
of grants under this subsection to ensure such uses comply with
the requirements of this section. The Secretary may withhold a
grant under this subsection if the Secretary determines that a
State has not complied with such requirements.
(d) Definitions.--In this section:
(1) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury or the Secretary's delegate.
(2) Slow-onset climate hazard.--The term ``slow-onset
climate hazard'' means a threat from climate change that
evolves gradually due to incremental change or because of an
increasing frequency or intensity of recurring climate impacts,
including--
(A) sea level rise;
(B) desertification;
(C) biodiversity loss;
(D) increasing temperatures;
(E) ocean acidification;
(F) soil salinization;
(G) drought;
(H) land and natural resource degradation;
(I) glacial retreat or reduced snow pack, and
related impacts; and
(J) permafrost thaw.
(3) State.--The term ``State'' means any of the 50 States,
the District of Columbia, or the Commonwealth of Puerto Rico.
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