In early April 2025, US Senators Bill Cassidy (Republican from Louisiana) and Lindsey Graham (Republican from South Carolina) re-introduced their Foreign Pollution Fee Act. Similar to Europe’s carbon border adjustment mechanism (CBAM) in that it aims to level the playing field among countries when it comes to greenhouse gas intensity of goods, the bill was originally introduced in 2023 alongside several other similar proposals by both Democrats and Republicans – see our detailed analysis of those from 2024.

The 2025 version of the proposed act differs significantly in design of the carbon charge, which goods are covered, and the international partnerships involved. Just like the previous version, however, external modeling of the bill’s effects shows it would not significantly lower global net greenhouse gas emissions. Its details are nevertheless relevant politically, as it was introduced by two Republican senators and is supported by a wide range of stakeholders who are otherwise at odds when it comes to environmental policy – this sets a precedent for potential bipartisan cooperation on a future CBAM-like bill that could involve a greater greenhouse gas reduction component going forward, especially if Republicans no longer hold a majority in both houses of the next US Congress.

Bill details

The act applies a variable ad valorem fee to certain imported products based on the difference between their greenhouse gas emissions intensity of production in the country of origin and in the US (measured in tons CO2e / ton of product).The fee varies depending on the extent of this emissions intensity difference (as measured in percent), with a higher charge applied the greater the difference – see Figure 1. The variable charge is even doubled on imports from non-market economy countries and from firms identified as “foreign entities of concern. The products in question are aluminium, fertilizer, glass, iron & steel, cement, and hydrogen (fuel), as well as “clean energy goods” like photovoltaic products and battery inputs.

Crucially, the bill does not put a price on emissions of greenhouse gases from US producers. It thus differs from Europe’s CBAM, which applies only to the extent that carbon prices are lower in the country of origin compared to the EU ETS. The Foreign Pollution Fee Act creates no domestic carbon price to which the playing field is being levelled.

“Levelling” instead refers to reducing the difference between US average greenhouse gas intensity of products and that of equivalent products produced elsewhere. This has the de facto effect of taxing imports (similar to tariffs), as US emissions intensity for most of the act’s covered products is low. That low intensity, however, is not necessarily due to US environmental regulations on production or carbon pricing. US steel, for example, is relatively “low carbon” because most of it is produced with electric arc furnaces rather than more carbon-intense basic oxygen blast furnaces.

Thus, the act’s main climate change mitigation element (as opposed to its protectionist element) is that it incentivises marginal improvements to the greenhouse gas intensity of overseas production, since goods manufactured with greenhouse gas intensities closer to those of the US face a lower import charge.

The act contains clauses offering countries that negotiate “international partnerships” with the US access to lower greenhouse gas intensity fees on a product basis. For poorer countries, it also offers access to certain types of foreign aid within such negotiated partnerships, but nonmarket economies (China) are not eligible for international partnership agreements.

Modeling by think-tanks, universities, and private consultancies varies significantly on the act’s economic implications for the US: estimated revenues from its implementation by e.g. Massachusetts Institute of Technology and Resources for the Future range from $200 billion in the first 10 years, to $3-4 billion in that decade, or “little to no revenue.”

With regard to the bill’s impact on mitigating climate change, however, the models do not vary: they conclude that the bill would have virtually no effect on global emissions. It would likely orient US imports of the covered goods toward countries with lower carbon intensity and incentivise (though not necessarily result in) increased US manufacturing of these goods, raising their price and thus reducing overall US consumption of them. US emissions from production would increase slightly, while overall emissions would decrease from lower US consumption. Emissions from foreign producers would not change much, as the relevant goods would find buyers in other regions.

Effects on Europe

The EU CBAM ensures that producers – regardless of the country of origin – pay the same price for emissions embedded in production processes that EU producers by being covered under the EU ETS. Since the US has no ETS or other type of carbon price, the Foreign Pollution Fee Act’s version of “levelling the playing field” is to create a competitive disadvantage for foreign producers whose greenhouse gas intensity is higher than their US counterparts – there is no incentive for dirtier domestic producers to reduce their greenhouse gas intensity.

The EU is unlikely to be greatly impacted by the proposed US legislation. Based on the Joint Research Council’s assessment of EU CBAM goods, EU products within the iron & steel, aluminium, and fertiliser sectors would all fall within Tier 1, the lowest amount of charges based on only a slight average intensity of production difference to the US – see Figure 2.

For aluminium products and all but one product in the fertiliser sector, the EU’s production is less greenhouse gas intense on average. We estimate that importers would pay on average 4-7% more than they do now for EU-made steel products. Simultaneously, EU iron & steel producers would be exposed to the EU carbon price and, depending on how trade talks pan out, to additional tariffs imposed by the Trump administration.

Does it have a chance?

According to its sponsors, the act has support from an array of stakeholders that typically do not agree on environment and trade measures. Endorsers include the US Steel Manufacturers Association, the Portland Cement Association, and the America First Policy Institute as well as the Climate Leadership Council, Citizens’ Climate Lobby, and Carbon Removal Alliance.

However, the bill will likely go nowhere in the current congress which is busy cutting anything even involving words like “green,” “environment” or “pollution.” So far,the proposal has merely been introduced and referred to the Senate Finance Committee. However, its introduction shows that at least some Republican members of congress are interested in supporting measures that can be characterised as addressing climate change at the US federal level. If the senate becomes majority Democrat in the next congress (which many legislators are banking on, given Trump’s decreasing approval levels) some of the CBAM-like bills proposed in the previous congress may be brought forward again, such that “merging” them with the Cassidy-Graham proposal would produce a bipartisan plan much more likely to gain support. The best candidate for this would be the Clean Competition Act proposed in the last congress by Senator Sheldon Whitehouse (Democrat from Rhode Island) and Representative Salud Carbajal (Democrat from California). That proposal includes US carbon pricing, and therefore constitutes a policy more similar to Europe’s CBAM.