Fireside Chat: The Case for Merging Trade and Climate Policy - Climate and Trade Summit 2024 | BPC

Summary

The panel discussion focused on the intersection of climate policy and trade, highlighting bipartisan efforts to address carbon emissions through border carbon adjustment mechanisms. Senators Sheldon Whitehouse and Bill Cassidy presented their respective bills, emphasizing the economic and environmental benefits of a coordinated international approach. The conversation also touched on the impact of such policies on least developed countries and the potential for revenue generation amidst fiscal challenges.

Takeaways

• 🌍 The panel discusses the increasing interest and attendance in climate and trade discussions, reflecting a growing awareness and engagement in these topics.
• 📈 There is a noted progress in the consideration of climate change within trade policy, with a room full of experts three years ago growing into a large crowd today.
• 🗳️ Senators Sheldon Whitehouse and Bill Cassidy, from different parties, are both champions of legislation that implements a border carbon adjustment, showing bipartisan support for climate policy.
• 🛂 The European Union's implementation of the Carbon Border Adjustment Mechanism (CBAM) is a driving force for the U.S. to consider its own policies, with the potential economic benefits being a key argument.
• 💡 The idea of a 'foreign pollution fee' is presented as a way to level the playing field for U.S. manufacturers who are complying with environmental regulations, versus those in countries with laxer standards.
• 🌿 The potential for a carbon border adjustment to incentivize global decarbonization is highlighted, with the U.S. and EU setting an example for the rest of the world.
• 🛑 Senator Whitehouse emphasizes the need for a price on carbon pollution to combat climate change, suggesting that free pollution cannot coexist with climate safety.
• 💼 Senator Cassidy argues against a domestic carbon tax, describing it as regressive and politically unfeasible, and instead focuses on an import-only policy.
• 🌐 The discussion touches on the international coordination needed for effective climate policy, suggesting that a united front of major economies could send a strong signal to polluting countries.
• 💡 The potential economic benefits of climate and trade policies are underscored, with the prospect of job growth and manufacturing revitalization in the U.S.
• 🏛️ The conversation also considers the fiscal implications of climate policy, with Senator Whitehouse suggesting that addressing climate change could prevent future economic shocks and thus reduce debt.

Q & A

What is the topic of the panel discussion in the script?

The panel discussion is focused on climate and trade policy, specifically the implementation of a carbon border adjustment mechanism (CBAM) and its implications for the US and the global economy.

Why is there a growing interest in climate and trade policy?

There is a growing interest because of the increasing recognition of the need to address climate change effectively, and the role that trade policy can play in promoting environmental standards and economic growth.

What is the significance of critical minerals in the context of this discussion?

Critical minerals are important for the development of clean energy technologies, and their mention highlights the need for policies that ensure a sustainable and secure supply chain, which is part of the broader climate and trade policy discussion.

What is the EU's current stance on carbon border adjustment?

The EU is in the process of implementing its new carbon border adjustment mechanism (CBAM), which is designed to put a price on carbon pollution for imported goods, thereby encouraging more sustainable practices globally.

What is the US's response to the EU's CBAM?

The US is considering its own policies, with Senators Sheldon Whitehouse and Bill Cassidy introducing legislation for a border carbon adjustment. The US aims to respond to the EU's initiative and lead in the policy space.

What are the key differences between the bills introduced by Senators Whitehouse and Cassidy?

Senator Whitehouse's bill includes a domestic component, applying the same emissions performance standard to imports and domestic products, whereas Senator Cassidy's bill focuses solely on imports without a specific domestic component.

How does Senator Whitehouse view the potential economic benefits of a carbon border adjustment policy?

Senator Whitehouse believes that such a policy could boost American manufacturing and jobs, and that it could serve as a revenue raiser, helping to address the US's fiscal challenges.

What is Senator Cassidy's perspective on the potential impact of a carbon tax on lower-income individuals?

Senator Cassidy opposes a carbon tax, arguing that it is a regressive tax that disproportionately affects the poorest people in society, and that government redistribution of such revenues is not always efficient or equitable.

How does the discussion of trade policy relate to national security concerns?

The speakers suggest that by using trade policy to encourage environmental standards, the US can address economic and military ambitions of countries like China, potentially reducing the need for military conflict.

What is the potential impact of a carbon border adjustment policy on least developed countries?

The policy could be designed to avoid penalizing deeply impoverished countries and could be paired with capital investment to help them transition to cleaner technologies, potentially providing a pathway for economic growth and development.

How does Senator Cassidy's bill address the concerns of least developed countries?

Senator Cassidy's bill includes provisions to grandfather in existing bases for low and middle-income countries, expecting compliance with Western standards only for new developments, thus providing a transition period for these countries to adapt.

Outlines

00:00

🌍 Climate and Trade Nerd Gathering

The speaker reflects on the growth of interest in climate and trade issues, noting the large and engaged crowd in attendance. They mention the progress made in the field over the past few years and highlight the importance of critical minerals, which will be discussed further in an upcoming event. The speaker introduces Senators Sheldon Whitehouse and Bill Cassidy, emphasizing their bipartisan work on border carbon policy and the significance of their legislation in addressing climate change through trade adjustments.

05:02

🛂 Responding to the EU's Carbon Border Adjustment Mechanism (CBAM)

Senator Sheldon Whitehouse discusses the necessity of a price on carbon pollution to combat climate change and the EU's proactive stance with their CBAM. He suggests that the US should follow suit, leveraging trade policy to encourage environmental responsibility. The Senator also points out the potential economic benefits of aligning with the EU's policy, including job and manufacturing growth in the US, and the importance of bipartisan support for such initiatives.

10:02

🇺🇸 US Competitiveness and the Benefits of a Border Carbon Adjustment

Senator Bill Cassidy emphasizes the progress the US has made in reducing emissions, particularly through the use of natural gas, and positions the US as having a natural advantage in a carbon-adjusted trade environment. He argues for a foreign pollution fee to level the playing field and promote American economic development, especially in rural communities. Cassidy also highlights the potential for increased trade with allies under a common environmental standard.

15:04

🏛️ Bipartisan Support and the Path Forward for Carbon Border Policy

The conversation between the two senators reveals their shared goal of utilizing trade policy to address climate change, despite differing approaches. Senator Whitehouse's bill includes a domestic component, applying the emissions performance standard to both domestic and imported goods, while Senator Cassidy's bill focuses solely on imports. They both acknowledge the challenges in reconciling their bills but express optimism for a bipartisan solution.

20:07

💰 Fiscal Considerations and the Revenue Potential of Climate Policy

Senator Whitehouse addresses the fiscal implications of climate and trade policy, arguing that such measures can boost the economy and generate revenue. He suggests that targeting polluters for revenue is more appealing than increasing income taxes on workers. Furthermore, he discusses the long-term economic risks posed by unaddressed climate change and the potential for climate policies to mitigate these risks.

25:07

🌐 International Coordination and the Broader Impact of US Climate Policy

Senator Cassidy expands on the international aspects of climate policy, discussing the potential for the US to work with allies to create a unified trading platform that encourages global decarbonization. He also touches on the success of using trade to influence environmental standards, as seen in the USMCA agreement with Mexico, and the importance of sending a strong price signal to the rest of the world to address carbon pollution.

30:07

🕊️ Avoiding Conflict and Promoting Economic Growth Through Climate Policy

The senators conclude the discussion by emphasizing the multifaceted benefits of climate and trade policy, including its potential to deter conflict, promote economic growth, and encourage global environmental responsibility. They highlight the importance of not wanting a hot war with China and how climate policy can be a tool for peaceful international cooperation and economic alignment.

🌳 The Global South and the Equity of Climate Policy

The final paragraph addresses concerns about the impact of climate policy on least developed countries. The senators propose strategies to support these nations, such as avoiding tariffs on deeply impoverished countries, providing capital investment for cleaner technologies, and creating pathways for economic growth through renewable energy development. They acknowledge the need for careful management to ensure fairness and effectiveness.

Keywords

💡Climate Nerds

The term 'Climate Nerds' is used colloquially to describe individuals who are deeply interested or knowledgeable about climate change issues. In the script, it highlights the growth of interest in climate-related topics, suggesting that what was once a niche interest has now expanded to a larger audience, as evidenced by the large crowd attending the event.

💡Climate and Trade Nerds

This compound term refers to individuals who are not only interested in climate change but also in trade policies. The script suggests that there is a growing intersection between these two areas of expertise, indicating that the audience might consist of people who are passionate about both climate issues and trade policies.

💡Critical Minerals

Critical Minerals are elements that are essential for various high-tech and industrial applications, including renewable energy technologies. The script mentions this term in the context of a panel discussion, indicating that the topic is gaining attention in the realm of climate and trade policy discussions.

💡Carbon Border Adjustment Mechanism (CBAM)

The CBAM is a policy tool being implemented by the European Union to address carbon emissions in the context of international trade. The script discusses the CBAM as a significant development in climate policy, which is prompting discussions on how the US should respond to this initiative.

💡Emissions Performance Standard

An Emissions Performance Standard is a regulatory measure that sets specific limits on the amount of greenhouse gases that can be emitted per unit of activity, such as per megawatt-hour of electricity generated. In the script, it is mentioned as the basis for the proposed carbon border adjustment policies, indicating its importance in setting a benchmark for emissions control.

💡Bipartisan

The term 'Bipartisan' refers to the cooperation or agreement between two major political parties, typically in the context of legislation or policy-making. The script emphasizes the bipartisan nature of the proposed climate and trade policies, suggesting that these initiatives have support from both Democrats and Republicans.

💡Demand Side Policy

Demand Side Policy refers to government actions that influence the demand for goods and services, often with the aim of achieving broader economic or social objectives. In the script, it is mentioned in the context of a new report on critical mineral demand side policy, highlighting the strategic use of policy to shape market behavior in relation to climate goals.

💡Regressive Tax

A regressive tax is a type of tax that takes a larger percentage of income from people with lower incomes and a smaller percentage from those with higher incomes. The script discusses the potential for a carbon tax to be regressive, highlighting concerns about its impact on lower-income households.

💡National Security

National Security refers to the measures taken by a government to protect the country's safety, territorial integrity, and interests against external and internal threats. In the script, it is mentioned in the context of how climate and trade policies can indirectly affect national security, particularly in relation to China's economic and military activities.

💡Economic Shock

An Economic Shock refers to a sudden and significant change in economic conditions, often leading to instability or crisis. The script discusses the potential for climate catastrophes to cause economic shocks, emphasizing the importance of proactive policy to mitigate such risks.

💡Behavioral Economics

Behavioral Economics is a field of study that combines insights from psychology and economics to understand how individuals make decisions. The script mentions behavioral economics in the context of how a carbon border adjustment mechanism could influence the behavior of countries like China, encouraging them to adopt cleaner manufacturing processes to remain competitive.

💡Grandfathering

Grandfathering is a regulatory principle where existing conditions or practices are allowed to continue while new regulations apply only to future cases. The script refers to grandfathering as a strategy in the proposed legislation to accommodate less developed countries, allowing them time to adapt to new environmental standards.

Highlights

The panel reflects on the growth of interest in climate and trade issues, noting a significant increase in attendance and engagement over the past few years.

Senator Sheldon Whitehouse emphasizes the importance of a price on carbon pollution for achieving climate safety and discusses the EU's implementation of the Carbon Border Adjustment Mechanism (CBAM).

Senator Bill Cassidy highlights bipartisan support for border carbon policy and the introduction of legislation for a border carbon adjustment.

The discussion points out the differences and similarities between the bills introduced by Senators Whitehouse and Cassidy, focusing on the use of emissions performance standards.

Senator Whitehouse argues for a domestic component in climate policy, suggesting it's easier for Democrats to advocate for a domestic carbon price.

Senator Cassidy opposes a domestic carbon tax, describing it as regressive and highlighting the potential negative impacts on low-income households.

The conversation explores the potential economic benefits of a carbon border adjustment for the U.S., including job and manufacturing growth.

Senator Whitehouse discusses the potential for a bipartisan approach to climate policy, suggesting that economic imperatives may overcome political hesitations.

Senator Cassidy emphasizes the importance of not allowing the EU to dictate U.S. policy and the need for the U.S. to take a stand on its own terms.

The panel discusses the role of trade policy in promoting environmental standards internationally and the potential for cooperation with allies.

Senator Cassidy explains the 'foreign pollution fee' concept, framing it as a tool for leveling the playing field with countries that have lax environmental regulations.

The discussion considers the impact of a carbon border adjustment on least developed countries and potential strategies for fair implementation.

Senator Whitehouse outlines the potential for a carbon border adjustment to serve as a form of economic leverage, influencing the behavior of countries like China.

Senator Cassidy connects energy policy, climate policy, economic development, and national security, arguing for a unified approach to these issues.

The panel concludes with a Q&A session, addressing audience questions on the practical implications and strategic considerations of a carbon border adjustment policy.

Transcripts

this time you're not getting rid of me

quite so quickly because I get to

moderate the next

panel

and I just want to reflect for a second

on the fact that we have a huge crowd

it's been so great

um you know I always say that there's

actually a lot of climate nerds and a

lot of trade nerds but there are very

few climate and trade nerds um but maybe

you're proving me wrong this is this is

a really nice crowd or maybe there's

just a bunch of climate separately

Trading here who were you know cross

curious trying to learn um and I just

you know when we started working on

this two and a half three years ago

um I don't think we would have been fil

been able to fill a room like this like

you know there was just like a a couple

dozen people you know that you would

want to talk to that had been thinking

about this um we've really just come so

far um and I thought what what Brian De

had to say was so interesting

He also mentioned critical minerals

which is a topic that we hadn't uh

covered quite as much so much today I'll

note that tomorrow um tomorrow morning

uh we at bpc are working with the

American critical mineral Association uh

on an event um that will feature Senator

hick and Looper um and it will coincide

with the release of our new report um on

uh critical mineral demand side policy

um so if you're interested in critical

minerals and or demand policy please

look up for that um and now I'd like to

bring to the stage Senators Sheldon

White House and Bill

Cassidy um please please give

[Applause]

me thank you have a

seat all right all

right so these are no strangers to most

of you um if you if you think at all

about um border carbon policy

these are probably two of the names you

know they've introduced actual honest to

God legislation implementing a border

carbon adjustment we're not talking

about a data bill here we're talking

about actual border carbon policy um and

that's amazing we've got a senator from

Rhode Island that's a Democrat a senator

from Louisiana that's a

Republican and they both have bills that

use an emissions performance standard as

as the basis for this carbon border

adjustment

there are plenty of differences between

their bills but there's really

interesting and key similarities um

which makes me really

optimistic um and again we're going to

save a few minutes at the end of this

chat for audience Q&A so if you want to

submit questions feel free to go ahead

and do that now uh and if I'm not

feeling too selfish I will ask them

instead of my own

questions first question Senator White

House is to

you the EU is going through the process

of implementing their their new carbon

border adjustment mechanism the cbam

it's getting a lot of attention some

people think it's a really great

terrific

policy uh some people think it's not

designed well there's a difference of

opinion

there but one thing that is quite clear

is that they are

acting H and the us up to now is not

doing

much so my question for you is how

should the US be responding to the EU

bam and and what is the case for us

leadership in this policy space um well

let me start at the

very 50,000 foot level which is that

it's pretty clear right now that we have

frittered away so much time dealing

effectively with climate change that the

remaining

Avenues to uh find a path to climate

safety

are extremely few and all of

them require a price on carbon pollution

you just can't have it be free to

pollute and get to climate safety period

so the seam in that sense is a terrific

thing fussing about the design aside

because it is and because they're going

to stick to their guns and because if

you don't want to be tariffed you're

going to have to step up uh yourself

when we did the IRA we got a lot of

complaining out of the European Union

and when they complained I would say

tough bounce suck it up if you don't

like it do your

own and I think those exact words should

properly come back to us and response to

the uh EU and now UK uh seam effort the

good news is to State the obvious it's

bipartisan um the other good news is

that we are not just two senators having

uh a conversation in hallways but we

have a very substantial and robust

support network of think tanks both Li

liberal leaning and libertarian leaning

who are working together pretty

seamlessly to provide at least

intellectual support for

us um and the last piece of good news is

that even if we sit on our rear ends and

do nothing and just let the cbam hit

us that will be good for the US economy

because the discrepancy between what the

tariffs are on our producers and what

the tariffs are on Chinese producers are

enough to offset the wage and pollution

cheating benefits of running your supply

chain into China so it is expected that

there will be significant job and

Manufacturing growth in the United

States as a result of the UC bam and we

only accelerate that further if we kill

off the headwind of tariffs on our

products going to the EU and the UK so

it will be good and again working in

bipartisan fashion to try to get towards

a ultimate compromise uh it will be a

lot better and that's setting aside the

climate benefits of avoiding havoc and

catastrophe that's just pure economic

job

uh calculations so we're I feel pretty

good about all this yeah good jobs and

avoiding havoc and catastrophe seem like

two nice things yeah yeah um and it's

not too bad to work

bipartisan uh as a representative the

bipartisan policy Center I will agree

with that thought that might be a point

you'd

like Senator Cassidy the Louisiana

legislature passed a resolution at the

state level last year in a border carbon

adjustment stating that the US Congress

should and and I'm going to quote from

this resolution from this Louisiana

state enact a trade

policy that holds High polluting

countries like China and Russia

accountable for their pollution and

promotes American Economic Development

and the rebuilding of the of United

States Supply chains particularly in R

rural communities by rewarding American

businesses and workers for their

Superior environmental performance while

penalizing Global

polluters that's the Louisiana state

legislature so can you help us

understand like why is this policy space

why are these sorts of policies so

important and good for Louisiana and did

you write that I I I could have but

importantly I didn't kind of Rose

spontaneously from the people there and

so I'm going to if this is kind of uh

Sheldon's side of it I'm going to give

my side of it and you'll see that

despite apparent differences they are

very compliment

what my state legislature acknowledges

and which Sheldon alluded to at the very

end of his remarks is that the United

States has made incredible progress in

decreasing our emission profile we now

have an emission in absolute amounts not

per capital not per unit of economy in

absolute amounts lower now than we did

in 1988 1988 is here this is where we

are now this has been part of marginally

Renewables marginally regulations

principally it has been the substitution

of natural gas for coal as a feed stock

for utilities and as a feed stock for

chemicals and Plastics instead of oil so

we in Louisiana are very aware of this

we are very aware that natural gas has

literally fueled the declining emissions

Associated here when Sheldon speaks

about our emission profile being lower

relative to the Chinese not surprising

they continue to use coal for their

utilities they don't turn on their

scrubbers uh so they don't to comply

with kind of norms on environmental

regulations my state legislature

recognizes that if you're a chemical

company in Louisiana complying with us

environmental regulations using natural

gas as a feed stock or perhaps nuclear

derived energy because we have a couple

big nuclear power plants uh to to run

the operation then that your emission

profile is much lower than the Chinese

and so if you're going to go over to

Europe and they're going to penalize the

carbon intensity of your good as as

Sheldon mentioned we are at a natural

Advantage now let's add let's build upon

that if the United States similarly puts

in such a uh fign pollution fee is how I

refer to it a forign pollution fee in

which Goods coming into the United

States have the avoided cost of

non-compliance with

regulation layered over the cost of the

product coming in then our Goods will be

at a competitive ad Vantage in the

United States and then if you extend

that once more if the United States and

the EU team up with Japan Australia

Canada UK you name it in which anybody

who wishes to import into one of those

countries has to comply with kind of

international Norms on uh controlling

emissions then we are taking Western

standards of Environmental Protection

and exporting them in return for access

to the richest markets in the world now

that that is all layered in to what my

state legislature is advocating and

that's why frankly I think that the

foreign pollution fee and trade is

incredibly good for American workers

incredibly good for our economy and I

could go further saying it's incredibly

good for our national

security and I love how you bring in the

the international aspect of you know

we're talking about a us-based policy

but there's there's plenty of room to

work in coordination with allies to

increase trade between allies we're not

talking about a policy that's intended

to decrease trade generally it's about

who we trade with and what the

incentives are on those other countries

to decarbonize if they want to import

into into our country yeah ideally you

have a common trading platform with the

EU the UK the US Canada Australia Japan

Mexico um and that enormous common

platform sends an incredibly powerful

price signal to the rest of the world to

clean up their pollution because we can

clean up us carbon pollution and methane

pollution but there's a whole world out

there that needs to address its problems

and the price signal is the best way to

get there you can Hector and you can

encourage and you can you know plead but

a good solid price signal gets a lot

more

attention and as proof of concept uh in

the usmca there are certain

environmental and labor standards

required of Mexico

now we don't typically think of Mexico

as being the most kind of

environmentally sensitive country uh but

if you look at the amount of pollution

or air emissions associated with

producing a ton of Steel and let's say

in the US it's one in the EU it is one

in China it's like 2.64 or something

like that in Mexico it's 1.2 the Mexican

emission profile is almost the same as

the United States which shows that using

trade as an instrument to

promote the commonality of concern for

emissions has worked with Mexico and I

think that kind of use case tells us it

could work with others too so you know

the two of you um clearly agree on so

much um you've each written detailed

thoughtful um pieces of

legislation um and you you made some

different design choices

and everyone here um should have

received a copy of our our new report

from bpc that we released on Monday um

laying out the different design options

for Designing this kind of policy the

pros and the cons of each and and if you

if you read it you'll see you know we we

we lay out which are the ones that are

in uh the foreign pollution fee act from

Senator Cassidy and which are the ones

in the clean competition act from

Senator White House one of the key

differences between your two bills is

that uh senator White House your your

bill has a strong domestic component Y

and you imply you you apply that same

domestic emissions performance standard

to Imports whereas sener Cassidy's bill

is really an Imports only policy with no

specific domestic component so Senator

White House you know how do you how do

you think about that difference between

your two bills um how important do you

think the domestic piece is to the

overall success of the policy well I

think to start with the politics it's a

hell of a lot easier for a Democrat to

advocate for a domestic price on carbon

pollution than it is for a member of the

Republican party to do that so I you

know it ain't all that tough for me um I

think that what we're both doing is

trying to build support for the concept

of responding to the seam and dealing

with the climate issue using the

Leverage of trade policy and economic

price signaling to cause results um you

know good efficient market uh

behavior and um at the end of the

day I think our bills are likely to come

together how they come together is TBD

we haven't pre-negotiated

anything um but I do believe the

European Union folks when they say that

they will not wave

tariffs on any country's exports unless

that

country has a domestic price on carbon

and so at some point American industry

is going to have to look at that and

make a decision about do we want relief

from tariffs or do we want to continue

the free to pollute business model that

has caused so much damage and I think as

that begins to come together you'll see

um more and more of a conversation about

that more and more economic studies

about the winners and losers and so

forth but I think at the end of the day

we have a bipartisan bamal bill um and

we're going to find different ways to

get there and it may or may not include

a domestic carbon price but I think if

the EU sticks to its guns and I think

the EU

will uh the economic imperative

ultimately becomes powerful enough to

overwhelm the political

cautions see you know I like that you do

think that there is a way to eventually

marry these two bills together though I

note that you mentioned there is no

prenuptual agreement there's no how we

get there

um I don't like that

image bz Zan can I can I address that

too yes sir one wherever you are LLY

Roberts that's a question that's up here

right I know her time is hat off to you

um I oppose it not because I'm a

republican because I think it's terrible

policy it is an incredibly regressive

tax now we don't have to imagine this if

you look at the story in the New York

Times about the woman in Maine who can

hardly afford her heating oil um and she

has to borrow from her church in order

to afford to heat her home in the winter

or the people in Western Massachusetts

who because Massachusetts has the

highest utility cost in the nation have

a difficult time affording their

difficult time affording their uh

utilities imagine if you increase that

more with the carbon

tax it is a regressive tax it falls

disproportionately upon the poorest

people in our society now we can say

we're going to pass it through

government back to them but government

has sticky fingers and you tend to

employ a lot of people who get a lot of

benefits and they end up earning six

figure incomes to work from home uh with

no accountability as whe whether they're

really showing up I'm not making that up

that is a reality today

now let's tell the American people

you're going to pay a lot more for your

Utilities in Maine air conditioning in

Louisiana so that we can pass back

through some tax break to you

politically this is not only just bad

policy politically it's a

nonstarter but let's go to a couple

other of the objections the EU is not

going to dictate our policy if the EU

says you're going to do it our way or

we're not going to do it at all frankly

we're a bigger economy than the EU they

have a vested interest in partnering

with us but let's just take on their

argument that they want to have a cost

of carbon technically they don't have a

cost of carbon they have a cap and trade

system and in that is imputed a price on

carbon The Economist would also say

though that compliance with a regulatory

regime to decrease emissions is also an

imputed price of carbon so there's three

ways to tax carbon one is to tax carbon

the second is to have a cap in trade

as the Europeans do and the third is to

have the imputed cost of compliance with

the regulatory regime we have a very

expensive regulatory regime a very

expensive but we're pleased for it it's

controlling our emissions that's what we

want to make China pay for which

currently they're not paying for that is

a very real cost and to imagine that is

not is to deny what the economist would

tell us uh so uh now one more thing I

just have to say because you're a

sophisticated audience uh I I spoke

specifically of non-point Source excuse

me a point source uh carbon tax uh again

think of I don't know the G uh the

carpet in the room but there's also

non-point source which is fuel jet fuel

we already have a carbon tax on that

it's called a gasoline tax or diesel tax

or jet fuel tax so if Society wants to

say for nonpoint source gasoline we're

going to jack up the gasoline tax is

what California has done to try and

discourage a use of but that's going to

be something which is done not as a

public policy on the federal level by

and large I think that will just be kind

of flowing naturally from what states do

so you can see we're going to disagree

on this a little bit of dis and I don't

want to I don't want to um you know

prolong the argument indefinitely but I

do think it's important to recognize

that a uh pollution fee that is actually

paid by the polluter is a very different

thing than taxing the little lady in

Maine who Bill Cassidy mentioned she

might never see the result

of the pollution fee because first of

all the entity that is being penalized

for polluting might pollute less so the

fee goes down and second as is the case

right now they might be making so much

damn money that if you believe in Market

competition they're going to have to

absorb a good deal of that as they try

to compete for uh the business of the

nice lady from Maine so the

um the notion that this is

a tax on the end user as opposed to a

penalty on the polluter I think is um

the one point that I would add to the

conversation thank you all right next

time we'll have to bring in Senators

Collins and King so they they can you

know respond to the little old lady in

Maine um Senator white house better be

careful there

[Laughter]

brother a lot of people think of you as

a climate

Champion but it's also worth noting that

you are the chair of the Senate budget

committee and the US is not exactly in a

great fiscal situation right now correct

deficits are high debt is high next year

$4 trillion doll of tax cuts including

cuts to individual income taxes are set

to

expire so you know in that fiscal

environment what is the case for this

climate and trade policy as a potential

Revenue raiser well there are a couple

first of all as I think Bill and I

agree um the cbam itself and a carbon

border fee in the United States in

addition boosts American manufacturing

and American jobs and the American

economy so you are in fact lifting the

economy and that creates more Revenue

you grow your way out of it now our

troubles are too big to just grow our

way out of um we're going to have to

deal with revenues and if you're looking

at a revenue

proposition uh depending on who you want

to get revenues from uh people who are

polluting a lot look like a much more

appealing place than people who are say

working um and raising income taxes so I

think um there's that uh and the third

piece which we've been focusing on in

the budget committee is that a third of

our roughly $30

trillion

debt comes

from economic

shocks that we didn't prepare adequately

for one was the 2008 mortgage meltdown

and the other was the covid

pandemic that's $10 trillion do plus

that they just blew up and added to our

uh debt so we need to remember that that

happened and look ahead to what the

coming economic shocks are and I would

argue that there is enormous very well

validated uh

warning of an imminent economic shock

coming from climate catastrophes and I

think I hate to say this but I think

we're actually in the early stages of

that in Florida right now uh as the uh

property insurance Market in Florida

melts

down and the as the chief Economist at

Freddy Mack said the way this operates

is you first have your insurance get too

expensive to

afford and then you can't get insurance

at all the companies are withdrawn and

then you can't get a mortgage which

means that you can't sell your house

because you're only dealing with Buyers

who can pay cash and that crashes the

supply and demand so you go from an

insurance crisis to a mortgage crisis to

a property values crash and

uh avoiding that by being more

responsible about addressing climate

Havoc I think is uh time well spent for

Congress senator Cassidy uh You released

your foreign pollution fee act last year

say that one more time you You released

your your legislation the foreign

pollution fee act last year um and kind

of a lot has happened since then um the

White House announced a new climate and

trade task force we heard from Ben Bei

earlier about that um we've we've seen

the pro it act Advance through the epw

committee on a strong bipartisan vote

now it's introduced in the house also

bipartisan how has has the the moving

you know the momentum on this issue um

along with you know I think renewed and

increased stakeholder engagement um

shape your strategic thinking about how

to move forward in this policy space so

um very good question um and you've

mentioned all the positive things um let

me give you my elevator pitch as I would

speak to a colleague and then I'll build

from there as to I think it goes from

there um in our country you cannot

separate energy policy from climate

policy from Economic Development policy

from National

Security well we've been paying to

decrease our

emissions China has been ignoring norms

for Emissions Control lowering their

cost of manufacturing attracting jobs

from around the world to China

strengthening their economy and they've

used that economic growth to fuel

military

activism so our energy policy our

climate policy um our economic policy

has all played into National Security if

you put in a foreign pollution fee or

carbon border adjustment mechanism then

China has to comply or else they pay a a

pay a fee but either the way it's

somewhat of a drag upon their economy it

equalizes the playing field as to where

economic growth occurs and I'd like to

think that more of it would occur here

relative to there that drag on their

economy will then kind of put the

breakes on their ability to pay for

militarization and of course energy

policy feeds into this now if I'm

speaking to a hawk I'm saying this is a

policy by which we can help defeat

Chinese militarism at least take a

little bit of the air out of it if I'm

speaking to a climate Hawk I can say

Sheldon o knows this but this is a way

to get the world's largest emitter to

begin to decrease their emissions if I'm

speaking to my Louisiana legislature I

said you can't help but notice that if

the Chinese used our natural gas instead

of their coal they could better comply

with lowering their emission standard

and that would be economic growth in the

United States because so many people are

involved in our energy industry now you

put it all together you've got a message

for whomever you're speaking to Robert

ligh Heiser now speaking of you know

whatever you think about this President

Trump looks like he's going to be our

next president if you believe the

polling Robert leiser was has been very

influential in his trade thinking in his

book no trade is free he recently wrote

in favor of a carbon border adjustment

mechanism for everything I just

described but you mentioned that the

White House just had their uh trade

their carbon border kind of trade issue

so I think that there is a bipartisan

recognition that China ignoring

International Norms on in on Pollution

Control have allowed them to have the

economic growth that has enabled their

militarization so I put all that

together there's going to be headwinds

there's going to be people you got to

explain it to but when the China

commission over on the house side is

understanding this issue talking about

this issue when ligh Heiser is writing

about it and endorsing it when Trump

wants to put tariffs on the um uh

Chinese Goods just on just a kind of

cart blanch this is actually more of a

rational approach and let me say one

more thing I do not want a h hot war

with China none of us should want a hot

war with China this is a way to kind of

put the breakes upon their economic

growth to bring them into alignment with

what we consider Norms in a way which is

not a hot War somebody one of our

questions earlier suggested that this

could be a form of protectionism I point

out the Chinese can get rid of this

tariff just by complying

think about that in fact I mentioned

this to a Chinese Minister from the

Chinese government and and he goes we

could live with that tariff he knows

what he's dealing with as opposed to it

being arbitrary so I actually think that

this is incredibly good foreign policy

incredibly good economic policy and

Incredibly good climate policy so it

feels like you're saying like this is

where we can get the China Hawks and the

climate Hawks to work together and

econom to push off the warhawks uh well

you the warhawks don't want war

but but certainly if China continues to

militarize You' be naive to assume that

we're not supposed to do something this

is a way which again just puts a little

bit of a drag and that drag slowing them

down maybe they have to divert more

resources to the welfare of their people

as opposed to building another

Battleship all right so we're going to

move on to audience questions uh we've

had a few cycling through here that the

one the one that caught my eye just a

second ago um was on least developed

countri

how how does a a

policy like you would Envision affect

least developed countries is there a way

to design it in a way that you know we

think is is

fair um but is also still effective I

would say that uh first of all you can

avoid deeply impoverished

countries second you could pair it with

very significant capital investment to

help Indonesia for instance move from

Coal Power to geothermal it's the ring

of fire they have

geothermal all day long so um but for

many of these poorer countries the

capital constraint of moving to the new

technology is an impediment once you

actually put a price on

carbon then there's a revenue

proposition to making that move which

brings investors so it actually uh helps

them in that sense and then finally if

you're look for the really clean

Technologies of solar and

wind um you have enormous capabilities

in the global

South and the prospect of developing

those capabilities once there's a

rationale for doing it once it pays to

put the cables under the med so that

Europe's demand can be met out of

Saharan solar Fields um things like that

you you end up I think with this being a

winning proposition for the global South

but it is an issue that has to be

watched carefully along the way because

you can't say great it's going to be

winning for proposition for you in 2040

but you Mr Minister need to go back and

get elected now and it's going to suck

for you now uh but you're just going to

have to you know tough bounce and and

wait for it to turn your way so that's

it's an issue that we have to watch and

manage it's a moral uh imp imperative as

well because it was our pollution that

created this mess um but I do think that

in its pure uh Natural State it is

actually immensely advantageous for the

global South Senator cassid we're we're

about to wrap this but I want to give

you a chance to to answer I'll be brief

our bill relies will complement what

Sheldon just said our bill rep relies

upon behavioral economics right now if

Vietnam wants to outcompete China

they've got to lower their manufacturing

costs less than China which means that

they have to even be

more more kind of callous regarding

environmental standards than the Chinese

remember cost to control emissions but

wait a second if now the comp the

country which has the cleanest product

avoids the emission the way that they

out compete the Chinese is not by

lowering the standards of those of the

Chinese but by increasing the standards

of those of the US the EU Etc and so we

flip the current Dynamic on the head of

of how this works now secondly than that

we also in our legislation say that if

you're a low Middle inome Country we

will grandfather in your existing base

but expect anything built from this

hence forth to be compliant with Western

standards if you're a high middle income

which China and Russia are high middle

income we don't grandfather in products

and so we give them actually a little

bit of a head start they're not as

wealthy they don't have the same ability

to adapt as the Chinese and so we kind

of compensate for that uh so we think

between those two kind of mechanism

behavioral economics and and

grandfathering in we create that pathway

for those less well-off countries to out

compete uh the people with whom they we

wish them to out compete Senators thank

you so much this was terrific thanks for

having us on Zan I appreciate it thank

you Zan good to see you