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30 Aug 2022


Exporters urged to pay close attention to the US Clean Competition Act and carbon taxes (Current Issue No.3341)


    The US Congress has proposed the Clean Competitive Bill, which comprises measures for the establishment of carbon pricing mechanisms for locally-produced goods, and the US Carbon Border Adjustment Mechanism (US-CBAM) for imported goods. The targeted industries are petroleum production and refinery, petrochemical products, fertilizers, hydrogen, adipic acid, cement, iron and steel, aluminum, glass, cellulose and paper and ethanol.
    In 2024, producers under the targeted industries in the US will be required to pay tax on greenhouse gas (GHG) emissions that exceed the average value. The average value of GHG emissions from industries in the US will decrease annually while the tax rate during the first year will be levied at USD55 per ton of carbon. In the subsequent year, it will be increased in line with the annual Consumer Price Index (CPI), plus 5 percent.   
    Two types of goods imported into the US will be subject to carbon tax in 2026: 1) products under the list of targeted industries, which will be subject to the carbon tax like locally-produced goods, and 2) finished goods that are made from raw materials under the list of targeted industries, as well as having components and weight of raw materials that exceed the set requirements. They will be subject to the carbon tax like locally-produced goods. During 2026-2027, the weight of raw materials used in such products will be limited to 500 pounds (approximately 226 kilograms) and 100 pounds (roughly 45 kilograms) from 2028 onwards. Products imported from the least developed countries (LDCs) per the United Nations’ criteria will be exempted from the carbon tax.     
    Over the short term, Thai exporters under the list of targeted industries should collect GHG emission data required for regular reporting for the EU-CBAM, which is scheduled for enforcement in 2023, and for the US-CBAM, which is being considered. Looking into the medium to long-term, business operators are advised to accelerate their investment in a transition to more environmentally-friendly manufacturing processes and GHG emission reductions; otherwise, they will experience higher export costs, which could in turn undermine their future competitiveness.