Thread by @Tim_L_Meyer

Thanks to @DavidKleimann for responding. His response raises 2 questions. 1) The EU is "unilaterally" imposing a CBM that does not give credit to US producers for the implied price of carbon from complying with regulations. Why does the US then bear the blame if it responds?

https://twitter.com/DavidKleimann/status/1423363820555231232

This seems to confuse the Trump 232s, where the US acted on its own, w/ the CBM situation, where the EU is the first mover. Moreover, I imagine one reason the EU has not recognized the implied price of carbon in its CBAM is to give it something to negotiate with.

2) Why would we assume that assessing duties on imports from countries w/ high domestic carbon costs would exacerbate substitution effects in a magnitude sufficient to overcome the effect of imposing a CBM on all carbon-intensive imports?

The status quo already bakes in this substitution, since in a world w/o CBMs imports from countries w/ high carbon costs are more expensive, all else equal, than imports from countries w/o high carbon costs.

I agree w/ Kleimann that CBMs like the Coons/Peters bill and the EU CBAM that do not grant credit for the costs of carbon at home (explicit or implicit) will not remedy this disparity among imports, but I doubt it will make it worse.

Moreover, the CBMs will cause substitution to cleaner domestic products, so it should overall promote substitution into cleaner products. That is enough for the measure to be "related" to conservation under XX(g).

Even if Kleimann is right that not giving full credit for domestic CBMs will increase substitution among imports, relative to the status quo, he is still assuming that a) substitution among imports will swamp b) substitution into cleaner domestic products relative to all imports.

That is ultimately a post-implementation empirical question, but given the status quo, it seems unlikely. As long as the marginal increase in (b) from the CBM is greater than the marginal increase in (a), the measure is "related" to conservation.

Finally, I'm not sure what the basis is for being certain how the petition process would relate to the exemption. The bill would likely change before enactment & the actual process would then be crafted by the admin via rule making. Thus, it could be a problem, but need not be.