Proof of the PROVE IT Act’s carbon tax agenda

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A recent post explains how S. 1863, the PROVE IT Act, could empower narrow partisan majorities to enact carbon tariffs and taxes in future reconciliation bills. Today’s post recaps that discussion and provides a fuller rebuttal of a key advocacy group’s claim that the PROVE IT Act has “no relevance” to carbon taxes.


The PROVE IT Act would require the Department of Energy (DOE) to estimate the greenhouse gas emission intensities of 22 categories of traded goods produced by US and foreign firms. The bill would also authorize DOE to estimate the emission intensities of any other product category included in the US harmonized tariff schedule (HTS). There are literally hundreds of such categories.

The Senate Environment and Public Works (EPW) Committee approved the PROVE IT Act by a vote of 14 to 5 at its January 18th business meeting. Ranking member Shelley Moore Capito (R-WV) offered an amendment to establish a point of order against using PROVE IT Act data in reconciliation bills to authorize or support carbon tariffs or taxes. Her amendment failed on a party-line vote of 9 to 10.

Reconciliation is an expedited procedure for debating tax and spending measures. Because reconciliation bills cannot be filibustered, they require only a simple majority of 50 senators plus the vice president for passage. Under the Congressional Budget Act’s “Byrd Rule” (2 U.S.C. 644), any senator may raise a point of order against a reconciliation bill measure. If the chair sustains the point of order, the measure is stricken from the bill. If three-fifths of members vote to overrule the chair (the same number as required to overcome a filibuster), the measure is retained.

Capito’s amendment works the same way. If the chair sustains the point of order, any revenue measure or tariff supported by PROVE IT Act data “shall be stricken,” unless 60 senators vote to waive or suspend the point of order.     

To explain the need for her amendment, Capito reviewed the following legislative history. In the 2022 reconciliation bill, the so-called Inflation Reduction Act (IRA), Vice President Kamala Harris cast the tie-breaking vote. That enabled Democrats to “weaponize” the Environmental Protection Agency’s (EPA’s) Greenhouse Gas Reporting Program, using it to impose first-ever methane emission taxes on the oil and gas industry. Absent Capito’s proposed point of order, slim partisan majorities could similarly use reconciliation to base carbon tariffs and taxes on PROVE IT Act data.

Although her amendment failed on a party-line vote, it succeeded in unmasking PROVE IT Act supporters’ game plan. After all, if they would not use PROVE IT Act data to support carbon pricing in future reconciliation bills, why not prove it by voting for an amendment that would thwart a replay of Democrats’ IRA-methane tax maneuver?

Tellingly, EPW Chair Thomas Carper (D-DE) said he could not support the amendment because it would “prohibit the enactment of any revenue measures based on the greenhouse gas emissions associated with commodities or products.” Clearly, he believes the unamended PROVE IT Act will facilitate “enactment … of revenue measures based on emissions associated with products or commodities.”     

Regrettably, four Committee Republicans—Kevin Cramer (R-ND), Cynthia Lummis (R-WY), Lindsey Graham (R-SC), and John Boozman (R-AZ)—ultimately voted for the PROVE IT Act even though all voted for Capito’s amendment, none disputed her IRA history lesson, and all heard Carper support the unamended PROVE IT Act as a carbon tax enabler.

At the EPW business meeting, principal Republican co-sponsor Kevin Cramer claimed the PROVE IT Act’s purpose is simply to counter the European Union’s carbon border adjustment mechanism (CBAM). Specifically, PROVE IT Act data would enable DOE to check the EU’s “math”—the emission intensity estimates used to calculate border taxes (carbon tariffs) on imported US goods.

But if S. 1863 is just a math-checking exercise, why not insist, as a condition for supporting the bill, that it be amended to thwart those who would weaponize it into a carbon-pricing database?

Cramer suggests that is not necessary because, quoting a “key backer,” the pro-carbon tax Climate Leadership Council (CLC), “the PROVE IT Act has no relevance in implementing a domestic carbon fee.” Why so? CLC continues:

A domestic carbon fee would be applied on fuels when they enter the economy—that data is readily available and has been for several decades. The PROVE IT Act is an analysis of average product-level emissions intensity data. This data, while useful for the reasons listed above, is irrelevant in implementing a U.S. carbon fee.

The remainder of this post examines CLC’s “no relevance” argument.

More carbon taxes than dreamed of in CLC’s philosophy

According to CLC, the PROVE IT Act analyzes average product-level emissions intensity whereas carbon fees apply to fuels when they enter the economy. Hence, CLC concludes, the former has “no relevance” to the latter. That is incorrect.

CLC confuses an ideal type—its preferred definition of a carbon tax—with the range of options actually open to lawmakers. Although most carbon tax bills that have been introduced in recent years would apply fees to fossil fuels at their points of economic entry, several would, in addition, tax carbon dioxide-equivalent (CO2e) emissions from industrial source categories. A partial list of such bills includes H.R. 2022 and S. 1548 in the 114th Congress, H.R. 6463 in the 115th Congress (reintroduced as H.R. 4520 in the 116th Congress, H.R. 3039 in the 117th Congress, and H.R. 6665 in the 118th Congress), H.R. 4058 in the 116th Congress, and S. 2085 in the 117th Congress.

No cosmic necessity restricts the applicability of carbon fees to fossil fuels at the mine mouth, well head, or fuel processing plant. None precludes the use of emissions intensity data in implementing carbon fees.

Indeed, average product emissions intensity is a key factor determining carbon fees in S. 3422, the Clean Competition Act (CCA), a bill introduced in the current Congress by Senators Sheldon Whitehouse (D-RI), Chris Coons (D-DE), Brian Schatz (D-HI), and Martin Heinrich (D-NM). The bill would establish a carbon border adjustment mechanism.

As summarized by World Resources Institute (WRI):

This bill would apply a carbon intensity charge on both domestically produced and imported energy-intensive goods if their emissions intensity exceeded a certain benchmark.

Note: The CCA’s carbon intensity charge (i.e. fee or tax) would apply to “both domestically produced and imported energy intensive goods,” and would do so “if their emissions intensity exceeded a certain benchmark.” What is that benchmark? You guessed it: the US industry average—exactly what the PROVE IT Act would require DOE to estimate. Under the CCA, if a company’s product is more carbon intensive than the average, the company—whether an importer or a domestic producer—pays a carbon fee.

Here’s WRI’s description of how CCA works:

The carbon price would start at $55/metric ton CO2 and increase at 5% per year above the rate of inflation. The starting point for the benchmark under CCA would be the U.S. industry average for that good and would decline at 2.5% every year for the first three years and 5% every year in subsequent years.

In other words, every year the carbon fee increases, and every year the benchmark average intensity determining who pays the fee decreases. If that strikes you as a plot to choke the life out of carbon-intensive manufacturing, you are not alone.

WRI adds this interesting observation: “The bill includes reporting requirements that would provide similar data on the carbon intensity of products as would be produced under the PROVE IT Act.”

That’s hardly surprising. Two of the three CCA sponsors—Sens. Whitehead and Heinrich—are also PROVE IT Act sponsors.

Deep relevance

CLC is mistaken. Carbon fees need not apply solely to fossil fuels when they enter the economy, and average product-level emissions intensity can be a basis for imposing carbon fees. Thus, as a technical matter, PROVE IT Act data can be highly relevant to implementing a domestic carbon fee.

More importantly, the PROVE IT Act is politically relevant to enacting a carbon fee.

As noted, the PROVE IT Act’s product-level emissions-intensity data are keyed to US tariff schedule product categories. Such a database is analytically essential for operating a carbon border adjustment mechanism. A CBAM, in turn, is politically essential for enacting a fuels-based, economy-wide carbon fee.

Why is that? A CBAM is a system of tariffs and rebates designed to mitigate the losses trade-exposed, energy-intensive domestic firms incur under an economy-wide carbon tax.   

CBAM carbon tariffs aim to ensure that carbon fees do not make domestically-produced goods less competitive than imported goods from countries that do not have comparable carbon pricing policies. CBAM rebates aim to ensure that domestic carbon taxpayers are not taxed again when they export goods to countries that do have comparable pricing policies.

Thus, the PROVE IT Act’s relevance to enacting a domestic carbon fee is fundamental. The bill would provide the database for a CBAM, without which few if any trade-exposed, carbon-intensive manufacturers would support an economy-wide carbon tax. In a formula: No PROVE IT Act, no CBAM; no CBAM, no carbon tax.