[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 2378 Introduced in Senate (IS)]

<DOC>






117th CONGRESS
  1st Session
                                S. 2378

To amend the Internal Revenue Code of 1986 to establish a border carbon 
            adjustment for the importation of certain goods.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 19, 2021

   Mr. Coons introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to establish a border carbon 
            adjustment for the importation of certain goods.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fair, Affordable, Innovative, and 
Resilient Transition and Competition Act'' or the ``FAIR Transition and 
Competition Act''.

SEC. 2. BORDER CARBON ADJUSTMENT.

    The Internal Revenue Code of 1986 is amended by adding at the end 
the following new subtitle:

                 ``Subtitle L--Border Carbon Adjustment

                ``Chapter 101--Border Carbon Adjustment

                ``CHAPTER 101--BORDER CARBON ADJUSTMENT

``Sec. 9901. Definitions.
``Sec. 9902. Determination of domestic environmental cost incurred.
``Sec. 9903. Determination of emissions for each sector.
``Sec. 9904. Border carbon adjustment.
``Sec. 9905. Administration of border carbon adjustment.
``Sec. 9906. Allocation of carbon border fee adjustment revenues.

``SEC. 9901. DEFINITIONS.

    ``For purposes of this subtitle:
            ``(1) Administrator.--The term `Administrator' means the 
        Administrator of the Environmental Protection Agency.
            ``(2) Baseline emissions.--The term `baseline emissions' 
        means the average greenhouse gas emissions of a company's 
        relevant sector, as determined under section 9903(a).
            ``(3) Benchmark emissions.--The term `benchmark emissions' 
        means the greenhouse gas emissions of the highest emitting 
        sites within a company's relevant sector in the United States, 
        as determined under section 9903(b).
            ``(4) Border carbon adjustment.--The term `border carbon 
        adjustment' means the fee imposed pursuant to section 9904.
            ``(5) CO<INF>2</INF>-e.--The term `CO<INF>2</INF>-e' means 
        the number of metric tons of carbon dioxide emissions with the 
        same global warming potential as one metric ton of another 
        greenhouse gas.
            ``(6) Covered fuel.--The term `covered fuel' means natural 
        gas, petroleum, coal, or any other product derived from natural 
        gas, petroleum, or coal that is used or may be used so as to 
        emit greenhouse gases to the atmosphere.
            ``(7) Covered good.--The term `covered good' means a 
        covered fuel or a product produced within a sector.
            ``(8) Domestic environmental cost incurred.--The term 
        `domestic environmental cost incurred' means the amount 
        determined under section 9902.
            ``(9) Greenhouse gas.--The term `greenhouse gas' has the 
        same meaning given such term under paragraph (3) of section 901 
        of the Energy Independence and Security Act of 2007 (42 U.S.C. 
        17321).
            ``(10) Greenhouse gas content.--The term `greenhouse gas 
        content' means the amount of greenhouse gases, expressed in 
        metric tons of CO<INF>2</INF>-e, which would be emitted to the 
        atmosphere by the use of a covered fuel.
            ``(11) Imported.--Irrespective of any other definition in 
        law or treaty, the term `imported' means to have landed on, 
        brought into, or introduced into any place subject to the 
        jurisdiction of the United States from a person or place 
        outside the United States.
            ``(12) Importer.--The term `importer' means a person who, 
        for any reason, brings a product from a foreign country into 
        the United States for consumption, use, or warehousing.
            ``(13) Production greenhouse gas emissions.--The term 
        `production greenhouse gas emissions' means the quantity of 
        greenhouse gases, expressed in metric tons of CO<INF>2</INF>-e, 
        emitted to the atmosphere resulting from the production, 
        manufacture, or assembly of a product, as determined under 
        section 9905.
            ``(14) Secretary.--The term `Secretary' means the Secretary 
        of the Treasury, or the Secretary's delegate.
            ``(15) Sector.--The term `sector' means industrial 
        facilities which produce one of the following products:
                    ``(A) Steel.
                    ``(B) Aluminum.
                    ``(C) Cement.
                    ``(D) Iron.
                    ``(E) Any product identified pursuant to section 
                9905(e).
                    ``(F) Any product for which greater than 50 percent 
                of the composition of such product consists of a 
                product described in subparagraphs (A) through (E).
            ``(16) State.--The term `State' means any of the 50 States, 
        the District of Columbia, or the Commonwealth of Puerto Rico.
            ``(17) Upstream greenhouse gas emissions.--The term 
        `upstream greenhouse gas emissions' means the quantity of 
        greenhouse gases, expressed in metric tons of CO<INF>2</INF>-e, 
        emitted to the atmosphere resulting from the extraction, 
        processing, transportation, financing, or other preparation of 
        a covered fuel for use, as determined under section 9905.

``SEC. 9902. DETERMINATION OF DOMESTIC ENVIRONMENTAL COST INCURRED.

    ``Not later than July 1, 2023, and annually thereafter, the 
Secretary (in coordination with the Director of the Office of 
Management and Budget, the Secretary of Commerce, the Secretary of 
Energy, the Administrator, the Secretary of Agriculture, the Secretary 
of Transportation, the United States Trade Representative, and the 
Secretary of the Interior) shall determine the domestic environmental 
cost incurred for each sector, and for the production of each covered 
fuel, based on the average cost incurred by companies within such 
sector (or, in the case of a covered fuel, the average cost incurred to 
produce such fuel) to comply with any Federal, State, regional, or 
local law, regulation, policy or program which is--
            ``(1) in effect at the time of such determination, 
        including any such law, regulation, policy, or program which is 
        implemented after the date of enactment of the FAIR Transition 
        and Competition Act, and
            ``(2) designed to limit or reduce greenhouse gas emissions, 
        including--
                    ``(A) the Clean Air Act (42 U.S.C. 7401),
                    ``(B) greenhouse gas emissions standards for 
                passenger cars and light trucks, and
                    ``(C) any State, regional, or local law, 
                regulation, policy, or program that imposes a cap-and-
                trade system with respect to, or a tax or fee on, 
                carbon dioxide.

``SEC. 9903. DETERMINATION OF EMISSIONS FOR EACH SECTOR.

    ``(a) Baseline Emissions.--Not later than July 1, 2023, and 
annually thereafter, the Administrator shall determine and publish the 
average greenhouse gas emissions of each sector during the prior 
calendar year in order to demonstrate the amount of progress made in 
reducing greenhouse gas emissions in the United States.
    ``(b) Benchmark Emissions.--Not later than July 1, 2023, and 
annually thereafter, the Administrator shall determine and publish the 
production greenhouse gas emissions for the top 1 percent of the 
emitting production sites within each sector in the United States 
during the prior calendar year.

``SEC. 9904. BORDER CARBON ADJUSTMENT.

    ``(a) Border Carbon Adjustment.--Beginning on January 1, 2024, in 
the case of any importer that imports a covered good into the United 
States, there shall be imposed a fee--
            ``(1) in the case of a covered fuel, in an amount equal to 
        the product of--
                    ``(A) the domestic environmental cost incurred in 
                the production of such fuel, multiplied by
                    ``(B) the upstream greenhouse gas emissions of such 
                fuel,
            ``(2) in the case of a product produced within a sector 
        which is not a covered fuel, in an amount equal to the product 
        of--
                    ``(A) the domestic environmental cost incurred for 
                the sector in which such product was produced, 
                multiplied by
                    ``(B) the production greenhouse gas emissions of 
                the product, or
            ``(3) in the case of a product produced within a sector for 
        which reliable data with respect to the production greenhouse 
        gas emissions of such product is not available, in an amount 
        equal to the product of--
                    ``(A) the benchmark emissions for the sector which 
                produced such product, multiplied by
                    ``(B) the domestic environmental cost incurred for 
                the sector in which such product was produced.
    ``(b) Exemptions.--
            ``(1) In general.--Not later than July 1, 2023, and 
        annually thereafter, the Secretary shall publish an annual 
        report which identifies all applicable countries, with any 
        covered good imported from an applicable country during the 
        calendar year beginning after the date of publication of such 
        report to be exempt from the border carbon adjustment.
            ``(2) Applicable countries.--For purposes of this 
        subsection, the term `applicable country' means--
                    ``(A) any country included on the list of Least 
                Developed Countries on the most recent Development 
                Assistance Committee List of Official Development 
                Assistance Recipients published by the Organisation for 
                Economic Co-operation and Development, and
                    ``(B) any country which--
                            ``(i) does not impose a border carbon 
                        adjustment on products produced or manufactured 
                        in the United States, and
                            ``(ii) the Secretary (in coordination with 
                        the Secretary of State, the United States Trade 
                        Representative, the Secretary of Commerce, the 
                        Secretary of Energy, the Administrator, the 
                        Secretary of Agriculture, the Secretary of 
                        Transportation, and the Secretary of the 
                        Interior) determines enforces laws and 
                        regulations designed to limit or reduce 
                        greenhouse gas emissions that are at least as 
                        ambitious as Federal laws and regulations 
                        designed to limit or reduce greenhouse gas 
                        emissions.

``SEC. 9905. ADMINISTRATION OF BORDER CARBON ADJUSTMENT.

    ``(a) In General.--The Secretary (in consultation with the 
Administrator, the United States Trade Representative, and the 
Secretary of Homeland Security) shall prescribe regulations and 
guidance to implement the border carbon adjustment.
    ``(b) Methodology.--In determining the production greenhouse gas 
emissions of a covered good, the Secretary shall use reliable 
methodologies which--
            ``(1) as may be necessary or convenient--
                    ``(A) distinguish between different types of 
                covered fuels,
                    ``(B) distinguish between a covered fuel's 
                greenhouse gas content and that covered fuel's upstream 
                greenhouse gas emissions,
                    ``(C) distinguish between the different types of 
                greenhouse gas emissions which compose a covered fuel's 
                upstream greenhouse gas emissions, as well as the 
                various processes which produced those emissions, and
                    ``(D) distinguish between the different types of 
                greenhouse gas emissions which compose a covered good's 
                production greenhouse gas emissions, as well as the 
                various processes which produced those emissions,
            ``(2) ensure that no covered good has the border carbon 
        adjustment imposed upon it more than once, and
            ``(3) are consistent with international treaties and 
        agreements, including free trade agreements.
    ``(c) Petition Procedure.--The Secretary shall establish fair, 
timely, impartial, and, to the extent necessary, confidential 
procedures by which the importer of any covered good may petition the 
Secretary to revise the Secretary's determination of the production 
greenhouse gas emissions of that importer's covered good.
    ``(d) International Negotiations.--The Secretary of State and the 
United States Trade Representative shall engage with other countries 
regarding reducing global greenhouse gas emissions through trade and 
ensuring fairness in the application of emissions-based tariffs.
    ``(e) Additional Sectors.--The Secretary (in consultation with the 
Director of the Office of Management and Budget, the Secretary of 
Commerce, the Secretary of Energy, the Administrator, the Secretary of 
Agriculture, the Secretary of Transportation, the Secretary of the 
Interior, and the United States Trade Representative) shall, for 
purposes of section 9901(15)(C), annually identify any product for 
which the Secretary determines--
            ``(1) there is reliable data for determining the production 
        greenhouse gas emissions of such product, and
            ``(2) that it is in the interest of the United States to 
        include such product under section 9901(15) for purposes of 
        application of the border carbon adjustment with respect to 
        such product.

``SEC. 9906. ALLOCATION OF CARBON BORDER FEE ADJUSTMENT REVENUES.

    ``With respect to the revenues collected under section 9904--
            ``(1) such revenues shall be used to supplement 
        appropriations made available in fiscal year 2024 and each 
        fiscal year thereafter to U.S. Customs and Border Protection, 
        in such amounts as are necessary to administer the border 
        carbon adjustment, and
            ``(2) from any amounts remaining following any supplemental 
        appropriation made with respect to amounts described in 
        paragraph (1)--
                    ``(A) 50 percent of such amounts remaining shall be 
                used to provide grants to States as prescribed in 
                section 3 of the FAIR Transition and Competition Act, 
                and
                    ``(B) 50 percent of such amounts remaining shall be 
                available, as provided by appropriation Acts, for 
                making expenditures to support the high-impact 
                research, development, demonstration, technology 
                transfer, commercialization, and export of technologies 
                that reduce or eliminate greenhouse gas emissions.''.

SEC. 3. RESILIENT COMMUNITIES GRANT PROGRAM.

    (a) In General.--The Secretary shall provide to each State a 
Resilient Communities Grant no later than April 1, 2025, and each 
calendar year thereafter, in an amount determined under subsection (c).
    (b) Eligible Purposes.--A State receiving a Resilient Communities 
Grant under this section shall use the amount of each such grant as 
follows:
            (1) To provide job training and worker transition 
        assistance, with priority given to workers and former workers 
        in fossil fuel-related industries.
            (2) To assist municipalities, counties, or other political 
        subdivisions of the State in--
                    (A) developing climate vulnerability assessments 
                and adaptation plans to help build resilience to rapid-
                onset and slow-onset climate hazards; and
                    (B) implementing such plans, which may include but 
                are not limited to such projects as climate-smart 
                infrastructure, agricultural climate solutions, and 
                natural climate solutions to build climate resilience 
                and support carbon sequestration.
            (3) To directly assist frontline communities who are 
        experiencing the earliest, most severe threats from climate 
        change with technical assistance and resources to undertake 
        efforts to build climate resilience.
            (4) Alleviate historical burdens imposed upon communities 
        of color, low-income communities, Tribal and Indigenous 
        communities, fossil fuel-dependent communities, and other 
        vulnerable populations that have been historically under-
        resourced due to inequities in resource allocation or 
        disproportionately burdened by environmental hazards, including 
        exposure to climate risks and polluted air, waterways, and 
        landscapes.
            (5) To provide relocation assistance to individuals and 
        populations when climate change or the energy transition 
        threatens their health, well-being, or livelihood.
            (6) To assist small businesses that are disproportionately 
        impacted by the border carbon adjustment imposed under subtitle 
        L of the Internal Revenue Code of 1986 (as added by section 2 
        of this Act).
    (c) Amount of Grant.--
            (1) In general.--The amount of the Resilient Communities 
        Grant made to any State for any calendar year shall be equal to 
        the product of--
                    (A) the total amount made available under section 
                9906(2)(A) of the Internal Revenue Code of 1986 (as 
                added by this Act) based on revenue collected in the 
                prior calendar year; and
                    (B) the State allocation percentage for the State 
                (as determined under paragraph (2)).
            (2) State allocation percentage.--Not later than December 
        1, 2024, and each calendar year thereafter, the Secretary (in 
        coordination with the Administrator of the Environmental 
        Protection Agency, the Secretary of Commerce, the Secretary of 
        Labor, the Secretary of Homeland Security, the Secretary of 
        Transportation, the Secretary of Agriculture, and the Secretary 
        of Energy) shall establish the formula for determining the 
        State allocation percentage for the following calendar year, 
        which, for each State, shall take into account--
                    (A) the percentage of the population of the United 
                States residing in such State;
                    (B) the vulnerability of such State to climate 
                change; and
                    (C) the percentage of the total United States 
                workforce employed in fossil fuel-related industries 
                who are employed in such industries in such State.
            (3) Climate vulnerability.--In accounting for the 
        vulnerability of each State to climate change under paragraph 
        (2)(B) for the purposes of determining the State allocation 
        percentage, the parties identified in paragraph (2) shall--
                    (A) at a minimum, consider the potential risks from 
                rapid-onset and slow-onset climate hazards to--
                            (i) human health and safety;
                            (ii) infrastructure and other physical 
                        assets; and
                            (iii) natural and agricultural systems;
                    (B) account for the disproportionate impact of 
                climate change on socially vulnerable communities;
                    (C) ensure the methods for determining climate 
                vulnerability do not result in a formula for State 
                allocation that inequitably allocates resources to 
                specific communities based on race, socioeconomic 
                status, or other such characteristics; and
                    (D) utilize relevant components of existing metrics 
                and indicators of climate vulnerability in the United 
                States wherever possible, including but not limited 
                to--
                            (i) the FEMA National Risk Index; and
                            (ii) over the past 5 years, the State's 
                        proportion of--
                                    (I) National Flood Insurance 
                                Program claims;
                                    (II) Fire Mitigation Assistance 
                                Grants; and
                                    (III) USDA fast track drought 
                                designations.
            (4) Minimum state allocation.--For purposes of subparagraph 
        (B), the State allocation percentage for any State shall not be 
        less than 1 percent.
            (5) Verification.--The Secretary shall verify the State use 
        of grants under this subsection to ensure such uses comply with 
        the requirements of this section. The Secretary may withhold a 
        grant under this subsection if the Secretary determines that a 
        State has not complied with such requirements.
    (d) Definitions.--In this section:
            (1) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
            (2) Slow-onset climate hazard.--The term ``slow-onset 
        climate hazard'' means a threat from climate change that 
        evolves gradually due to incremental change or because of an 
        increasing frequency or intensity of recurring climate impacts, 
        including--
                    (A) sea level rise;
                    (B) desertification;
                    (C) biodiversity loss;
                    (D) increasing temperatures;
                    (E) ocean acidification;
                    (F) soil salinization;
                    (G) drought;
                    (H) land and natural resource degradation;
                    (I) glacial retreat or reduced snow pack, and 
                related impacts; and
                    (J) permafrost thaw.
            (3) State.--The term ``State'' means any of the 50 States, 
        the District of Columbia, or the Commonwealth of Puerto Rico.
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