Border adjustment tax

Rising trade tensions between the U.S. and the European Union, two of the most important global leaders when it comes to climate policy, could undermine key climate initiatives of both governments and make it harder for the world to put the brakes on climate change. The two have clashed over the 2022 Inflation Reduction Act’s requirements that products be made in America to receive certain U.S. subsidies. The EU recently announced plans for its own domestic-only clean technology subsidies in response. The U.S. and EU also now have competing carbon tariff proposals, and these could end up undermining each other. In December 2022, the EU reached a provisional agreement on a carbon border adjustment mechanism. It will put carbon-based tariffs on steel, aluminum and other industrial imports that aren’t regulated by comparable climate policies in their home countries. The Biden administration, meanwhile, proposed a “green steel club” of nations that would coo...