U.S. Can Build and Fight Climate Change at Same Time

(Bloomberg Opinion) -- As part of efforts to pay for President Joe Biden's proposed $3.5 trillion spending plan and ahead of a burst in expected infrastructure outlays, Senate Democrats are proposing the U.S. impose tariffs on carbon-intensive imports. This idea resembles the European Union’s newly unveiled border-adjustment taxes on steel, cement and aluminum produced in countries with lax environmental regulations.

These levies have appeal in that they do the double duty of targeting polluters while raising money to cover other expenses. But when it comes to prioritizing climate initiatives, it would also be worth relaxing Trump-era tariffs that penalize low-carbon-emitting producers, even if it means forgoing revenue.

Companies today can source their steel, aluminum, concrete and other materials from Chinese and other suppliers whose production methods emit extreme amounts of carbon dioxide into the atmosphere. Or they can choose to procure these materials from companies that use less carbon-intensive methods. The choice can make a big difference.

Consider steel. The global steel industry alone emitted 3.5 gigatons of carbon dioxide in 2019, accounting for 11% of the world’s carbon dioxide emissions, according to the Global Efficiency Initiative. However, not all steel is produced the same way. For example, steel from China was found to produce the most carbon emissions while steel from Spain and Italy, which is made using a higher percentage of scrap material, was found to produce the lowest. U.S.-produced steel ranked fourth lowest.

Under current trade rules, the U.S. imposes the same 25% tariff on all steel produced outside of the U.S., Canada and Mexico regardless of the amount of carbon emitted in the process. This incentivizes companies that need to import steel to buy cheap Chinese steel, which is the worst for the environment. Imposing more tariffs, as Senate Democrats are proposing, won’t necessarily promote the use of low-carbon alternatives. But the Biden administration could prioritize low-carbon-intensive steel either by ending the tariffs on these items upfront or by expanding the tariff exclusion policy already in place to include low-carbon materials.

The aluminum industry is also operating under similar onerous tariffs, which  prevent low-carbon options from proliferating. In 2017, the U.S. imposed a 10% tariff on all aluminum imports except for those from Canada and Mexico. Aluminum is a lightweight material that is used widely in electric vehicles, high voltage power lines and in skyscrapers to reflect sunlight and reduce energy consumption -- all areas that are central to the Biden administration’s infrastructure and climate goals. But aluminum is an energy-intensive material to produce. Aluminum produced in China relies on coal-fired power plants that burn more coal by themselves than every country in the world except India, the U.S. and China itself.

There are more sustainable options, such as low-carbon-intensity aluminum  made by Pittsburgh-based Alcoa and aluminum produced using hydropower by Anglo-Russia EN+ Group. But because of the 10% tariffs imposed on all non-North American aluminum, low-carbon-intense aluminum from Europe is treated the same as high-carbon-intense aluminum from China. An exemption would rectify that.

Beyond steel and aluminum, many other low-carbon-intensity materials used in construction are subject to tariffs and could also benefit from exemption under the exclusionary process already in place. For example, French cement maker Hoffman Green Cement Technologies has developed a process that uses a waste product from steel production to make cement, cutting carbon emissions to one-fifth of those from traditional methods.

Dropping tariffs on low-carbon-intense construction materials would also benefit American companies that produce similar low-carbon-intense materials because it would induce other countries to drop their retaliatory tariffs. Thus, companies such as Classic Metal Roofing System, which produces shingles that are made from 99%-recycled aluminum and contain a reflective coating that helps reduce energy costs, would be able to export their product more efficiently to other countries.

If the Biden administration is serious about protecting the environment even as it repairs American infrastructure, then it needs to prioritize using materials with the lowest emissions possible. It can do this by using trade policies to lift low-carbon-intensity materials out of the current web of tariffs, giving everyone better and cheaper access to these more sustainable materials.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Ellen R. Wald is president of Transversal Consulting and a nonresident senior fellow at the Atlantic Council's Global Energy Center.

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