Two people familiar with the plan said on Wednesday that the US officials are proposing to levy tariffs on steel and aluminum based on how much carbon the country's industries emit, in order to fight climate change and dirty metals made in China and elsewhere.
The proposal from the U.S Trade Representative's office to be negotiated with the European Union would create a club of countries that are trying to reduce carbon emissions. The plan would set pollution standards in the production of steel and aluminum.
The countries with emissions exceeding the standards would pay higher tariffs when exporting metals to countries with lower emissions, the sources briefed on the plans said. Countries with steel and aluminum plant emissions below or below the standards would pay lower tariffs, the sources said.
The proposal, which is now being shared with industry and EU officials, comes from U.S. discussions on green steel production over the past year after Washington agreed to eliminate tariffs on EU-produced steel and aluminum in exchange for a quota system.
U.S. steelmakers claim to have the world's lowest carbon emissions levels, in part because 70% of American steel is made from scrap iron in electric-arc furnaces rather than coal-fired blast furnaces. Steelmakers in Europe rely more heavily on coal, and the plan would be advantageous to U.S. producers.
The U.S.-EU talks on low-carbon steel have been a priority for China, which relies on coal for most of its steel output and low-grade iron ore that contributes to high carbon emissions.
If implemented, the plan would provide new grounds for excluding Chinese steel from Western markets. Antidumping laws to combat pricing below production costs, laws aimed at combating government subsidies or laws aimed at safeguarding strategic industries are some of the most U.S. tariffs.
One of the sources said that the proposal aimed to incentivize investments to reduce emissions because of the fact that it would provide a lower level of carbon tariffs, while countries outside the club would pay higher tariffs.
This is all very conceptual and there is a lot of work ahead on this. Details are going to be very important. A USTR spokeswoman didn't respond immediately to a request for comment on the plan.