Steel groups back border tax

The presidents of the American Iron and Steel Institute (AISI) and the Steel Manufacturers Association (SMA) each have issued statements of support, with qualifications, for the Foreign Pollution Fee Act of 2023, which has been introduced to the United States Senate by Sen. Bill Cassidy of Louisiana.

In a five-page document hosted on Cassidy’s website, the Louisiana Republican writes, “The U.S. has eliminated more emissions than any other country in the last fifteen years, and our economy is 44 percent more carbon efficient than the world average.”

Such comments have been made regularly by steel company executives in the U.S., including from electric arc furnace (EAF) producers like Nucor Corp. and Steel Dynamics Inc. and by the nation’s two remaining blast furnace operators, Cleveland-Cliffs and U.S. Steel Corp., all of whom recycle steel scrap into new steel.

Cassidy’s bill is not narrowly focused on steel, however. Energy products like natural gas, oil, hydrogen, minerals, solar panels and wind turbines; and industrial products like aluminum, cement, glass, iron, steel, petrochemicals and paper are named by the senator as covered products.

A chart used by Cassidy in his Foreign Pollution Fee policy details document assigns a 1.0 carbon intensity score for American-made aluminum, iron, steel, paper and other products covered by the act. Meanwhile, metals produced by China carry a 1.7 score while Russia earns a 3.7 carbon intensity score.

Cassidy says the bill has been designed to expand into international partnerships that encourage trade between participating countries, provide growth opportunities for U.S. manufacturers, and secure supply chains while further isolating bad actors like China.

China and Russia are the two countries singled out as a focus of the bill. “Products made in China, on average, generate three times the emissions of the same products made in the U.S. In addition, goods produced in Russia emit four times the emissions,” Cassidy writes.

Sanctions imposed on Russia after its invasion of Ukraine have put it largely out of the running as a supplier of steel to the U.S. this year. In the first nine months of this year, however, China has shipped 486,000 tons of steel to America, making it the eighth ranked overseas supplier, according to the U.S. Census Bureau.

Both Washington-based steel industry trade groups nonetheless say the “polluter pays” fee is the right way to reward the American steel industry for its emissions reduction efforts and investments.

“Solution focused proposals like this benefit the American steel industry,” says Philip K. Bell, president of the SMA. “The United States makes the cleanest, lowest emissions steel products in the world. This policy would incentivize high emitting producers to take the necessary steps to reduce emissions and earn the right to sell products into our market.

“Making producers of dirty steel pay a surcharge is fairer to U.S. producers who are investing billions of dollars to electrify, modernize, and decarbonize our steel industry in a difficult regulatory environment. As the bill evolves, it will be important to focus not only on China but also on other regions of the world that have non-market excess capacity for steel that makes its way to our shores.”

“The most effective way to reduce global greenhouse gas (GHG) emissions is through policies that hold the most GHG-intensive producers in the world accountable,” says Kevin Dempsey, president and CEO of the AISI.

“Establishing a comprehensive GHG border fee that requires higher-emitting imports to pay for those emissions will help level the playing field and ensure U.S. producers investing in cleaner production processes are not undercut."

Dempsey did not endorse the legislation in its entirety, however, and like Bell, he has a question as to which countries would be exempted from the border tax. As currently drafted, the Foreign Pollution Fee would not apply to goods made in any country with which the United States has a free trade agreement and lists several other potential avenues of exemption.

“One aspect of the legislation that we think still needs further work is the country coverage of the new GHG border fee,” Dempsey says. “AISI is concerned that this legislation as currently drafted would exempt some countries from being subject to the border fee, even if products made in those countries have higher GHG emissions intensity than that of comparable American-made goods.

“We look forward to continuing to work with Sen. Cassidy and his colleagues to ensure that the United States establishes a GHG border fee structure that applies to all imports of steel products with higher GHG emissions intensity than those manufactured in the U.S., regardless of the country of origin of those imports.”

A 92-page draft of the Foreign Pollution Fee Act of 2023  and the senator’s five-page summary can be found on Cassidy’s website.