II 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Fair, Affordable, Inno5 vative, and Resilient Transition and Competition Act’’ or 

6 the ‘‘FAIR Transition and Competition Act’’. 

7 SEC. 2. BORDER CARBON ADJUSTMENT. 

8 The Internal Revenue Code of 1986 is amended by 

9 adding at the end the following new subtitle: 


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1 ‘‘Subtitle L—Border Carbon 

2 Adjustment 

‘‘CHAPTER 101—BORDER CARBON ADJUSTMENT

3 ‘‘CHAPTER 101—BORDER CARBON 

4 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. 

5 ‘‘SEC. 9901. DEFINITIONS. 

6 ‘‘For purposes of this subtitle: 

7 ‘‘(1) ADMINISTRATOR.—The term ‘Adminis8 trator’ means the Administrator of the Environ9 mental Protection Agency. 

10 ‘‘(2) BASELINE EMISSIONS.—The term ‘baseline 

11 emissions’ means the average greenhouse gas emis12 sions of a company’s relevant sector, as determined 

13 under section 9903(a). 

14 ‘‘(3) BENCHMARK EMISSIONS.—The term 

15 ‘benchmark emissions’ means the greenhouse gas 

16 emissions of the highest emitting sites within a com17 pany’s relevant sector in the United States, as deter18 mined under section 9903(b). 

19 ‘‘(4) BORDER CARBON ADJUSTMENT.—The 

20 term ‘border carbon adjustment’ means the fee im21 posed pursuant to section 9904. 


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1 ‘‘(5) CO2-e.—The term ‘CO2-e’ means the num2 ber of metric tons of carbon dioxide emissions with 

3 the same global warming potential as one metric ton 

4 of another greenhouse gas. 

5 ‘‘(6) COVERED FUEL.—The term ‘covered fuel’ 

6 means natural gas, petroleum, coal, or any other 

7 product derived from natural gas, petroleum, or coal 

8 that is used or may be used so as to emit green9 house gases to the atmosphere. 

10 ‘‘(7) COVERED GOOD.—The term ‘covered good’ 

11 means a covered fuel or a product produced within 

12 a sector. 

13 ‘‘(8) DOMESTIC ENVIRONMENTAL COST IN14 CURRED.—The term ‘domestic environmental cost 

15 incurred’ means the amount determined under sec16 tion 9902. 

17 ‘‘(9) GREENHOUSE GAS.—The term ‘greenhouse 

18 gas’ has the same meaning given such term under 

19 paragraph (3) of section 901 of the Energy Inde20 pendence and Security Act of 2007 (42 U.S.C. 

21 17321). 

22 ‘‘(10) GREENHOUSE GAS CONTENT.—The term 

23 ‘greenhouse gas content’ means the amount of 

24 greenhouse gases, expressed in metric tons of CO2- 


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1 e, which would be emitted to the atmosphere by the 

2 use of a covered fuel. 

3 ‘‘(11) IMPORTED.—Irrespective of any other 

4 definition in law or treaty, the term ‘imported’ 

5 means to have landed on, brought into, or intro6 duced into any place subject to the jurisdiction of 

7 the United States from a person or place outside the 

8 United States. 

9 ‘‘(12) IMPORTER.—The term ‘importer’ means 

10 a person who, for any reason, brings a product from 

11 a foreign country into the United States for con12 sumption, use, or warehousing. 

13 ‘‘(13) PRODUCTION GREENHOUSE GAS EMIS14 SIONS.—The term ‘production greenhouse gas emis15 sions’ means the quantity of greenhouse gases, ex16 pressed in metric tons of CO2-e, emitted to the at17 mosphere resulting from the production, manufac18 ture, or assembly of a product, as determined under 

19 section 9905. 

20 ‘‘(14) SECRETARY.—The term ‘Secretary’ 

21 means the Secretary of the Treasury, or the Sec22 retary’s delegate. 

23 ‘‘(15) SECTOR.—The term ‘sector’ means in24 dustrial facilities which produce one of the following 

25 products: 


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1 ‘‘(A) Steel. 

2 ‘‘(B) Aluminum. 

3 ‘‘(C) Cement. 

4 ‘‘(D) Iron. 

5 ‘‘(E) Any product identified pursuant to 

6 section 9905(e). 

7 ‘‘(F) Any product for which greater than 

8 50 percent of the composition of such product 

9 consists of a product described in subpara10 graphs (A) through (E). 

11 ‘‘(16) STATE.—The term ‘State’ means any of 

12 the 50 States, the District of Columbia, or the Com13 monwealth of Puerto Rico. 

14 ‘‘(17) UPSTREAM GREENHOUSE GAS EMIS15 SIONS.—The term ‘upstream greenhouse gas emis16 sions’ means the quantity of greenhouse gases, ex17 pressed in metric tons of CO2-e, emitted to the at18 mosphere resulting from the extraction, processing, 

19 transportation, financing, or other preparation of a 

20 covered fuel for use, as determined under section 

21 9905. 

22 ‘‘SEC. 9902. DETERMINATION OF DOMESTIC ENVIRON23 MENTAL COST INCURRED. 

24 ‘‘Not later than July 1, 2023, and annually there25 after, the Secretary (in coordination with the Director of 


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1 the Office of Management and Budget, the Secretary of 

2 Commerce, the Secretary of Energy, the Administrator, 

3 the Secretary of Agriculture, the Secretary of Transpor4 tation, the United States Trade Representative, and the 

5 Secretary of the Interior) shall determine the domestic en6 vironmental cost incurred for each sector, and for the pro7 duction of each covered fuel, based on the average cost 

8 incurred by companies within such sector (or, in the case 

9 of a covered fuel, the average cost incurred to produce 

10 such fuel) to comply with any Federal, State, regional, or 

11 local law, regulation, policy or program which is— 

12 ‘‘(1) in effect at the time of such determination, 

13 including any such law, regulation, policy, or pro14 gram which is implemented after the date of enact15 ment of the FAIR Transition and Competition Act, 

16 and 

17 ‘‘(2) designed to limit or reduce greenhouse gas 

18 emissions, including— 

19 ‘‘(A) the Clean Air Act (42 U.S.C. 7401), 

20 ‘‘(B) greenhouse gas emissions standards 

21 for passenger cars and light trucks, and 

22 ‘‘(C) any State, regional, or local law, reg23 ulation, policy, or program that imposes a cap24 and-trade system with respect to, or a tax or 

25 fee on, carbon dioxide. 


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1 ‘‘SEC. 9903. DETERMINATION OF EMISSIONS FOR EACH SEC2 TOR. 

3 ‘‘(a) BASELINE EMISSIONS.—Not later than July 1, 

4 2023, and annually thereafter, the Administrator shall de5 termine and publish the average greenhouse gas emissions 

6 of each sector during the prior calendar year in order to 

7 demonstrate the amount of progress made in reducing 

8 greenhouse gas emissions in the United States. 

9 ‘‘(b) BENCHMARK EMISSIONS.—Not later than July 

10 1, 2023, and annually thereafter, the Administrator shall 

11 determine and publish the production greenhouse gas 

12 emissions for the top 1 percent of the emitting production 

13 sites within each sector in the United States during the 

14 prior calendar year. 

15 ‘‘SEC. 9904. BORDER CARBON ADJUSTMENT. 

16 ‘‘(a) BORDER CARBON ADJUSTMENT.—Beginning on 

17 January 1, 2024, in the case of any importer that imports 

18 a covered good into the United States, there shall be im19 posed a fee— 

20 ‘‘(1) in the case of a covered fuel, in an amount 

21 equal to the product of— 

22 ‘‘(A) the domestic environmental cost in23 curred in the production of such fuel, multiplied 

24 by 

25 ‘‘(B) the upstream greenhouse gas emis26 sions of such fuel, 


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1 ‘‘(2) in the case of a product produced within 

2 a sector which is not a covered fuel, in an amount 

3 equal to the product of— 

4 ‘‘(A) the domestic environmental cost in5 curred for the sector in which such product was 

6 produced, multiplied by 

7 ‘‘(B) the production greenhouse gas emis8 sions of the product, or 

9 ‘‘(3) in the case of a product produced within 

10 a sector for which reliable data with respect to the 

11 production greenhouse gas emissions of such product 

12 is not available, in an amount equal to the product 

13 of— 

14 ‘‘(A) the benchmark emissions for the sec15 tor which produced such product, multiplied by 

16 ‘‘(B) the domestic environmental cost in17 curred for the sector in which such product was 

18 produced. 

19 ‘‘(b) EXEMPTIONS.— 

20 ‘‘(1) IN GENERAL.—Not later than July 1, 

21 2023, and annually thereafter, the Secretary shall 

22 publish an annual report which identifies all applica23 ble countries, with any covered good imported from 

24 an applicable country during the calendar year beVerDate Sep 11 2014 23:09 Jul 27, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2378.IS S2378

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1 ginning after the date of publication of such report 

2 to be exempt from the border carbon adjustment. 

3 ‘‘(2) APPLICABLE COUNTRIES.—For purposes 

4 of this subsection, the term ‘applicable country’ 

5 means— 

6 ‘‘(A) any country included on the list of 

7 Least Developed Countries on the most recent 

8 Development Assistance Committee List of Of9 ficial Development Assistance Recipients pub10 lished by the Organisation for Economic Co-op11 eration and Development, and 

12 ‘‘(B) any country which— 

13 ‘‘(i) does not impose a border carbon 

14 adjustment on products produced or manu15 factured in the United States, and 

16 ‘‘(ii) the Secretary (in coordination 

17 with the Secretary of State, the United 

18 States Trade Representative, the Secretary 

19 of Commerce, the Secretary of Energy, the 

20 Administrator, the Secretary of Agri21 culture, the Secretary of Transportation, 

22 and the Secretary of the Interior) deter23 mines enforces laws and regulations de24 signed to limit or reduce greenhouse gas 

25 emissions that are at least as ambitious as 


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1 Federal laws and regulations designed to 

2 limit or reduce greenhouse gas emissions. 

3 ‘‘SEC. 9905. ADMINISTRATION OF BORDER CARBON ADJUST4 MENT. 

5 ‘‘(a) IN GENERAL.—The Secretary (in consultation 

6 with the Administrator, the United States Trade Rep7 resentative, and the Secretary of Homeland Security) shall 

8 prescribe regulations and guidance to implement the bor9 der carbon adjustment. 

10 ‘‘(b) METHODOLOGY.—In determining the production 

11 greenhouse gas emissions of a covered good, the Secretary 

12 shall use reliable methodologies which— 

13 ‘‘(1) as may be necessary or convenient— 

14 ‘‘(A) distinguish between different types of 

15 covered fuels, 

16 ‘‘(B) distinguish between a covered fuel’s 

17 greenhouse gas content and that covered fuel’s 

18 upstream greenhouse gas emissions, 

19 ‘‘(C) distinguish between the different 

20 types of greenhouse gas emissions which com21 pose a covered fuel’s upstream greenhouse gas 

22 emissions, as well as the various processes 

23 which produced those emissions, and 

24 ‘‘(D) distinguish between the different 

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1 pose a covered good’s production greenhouse 

2 gas emissions, as well as the various processes 

3 which produced those emissions, 

4 ‘‘(2) ensure that no covered good has the bor5 der carbon adjustment imposed upon it more than 

6 once, and 

7 ‘‘(3) are consistent with international treaties 

8 and agreements, including free trade agreements. 

9 ‘‘(c) PETITION PROCEDURE.—The Secretary shall es10 tablish fair, timely, impartial, and, to the extent necessary, 

11 confidential procedures by which the importer of any cov12 ered good may petition the Secretary to revise the Sec13 retary’s determination of the production greenhouse gas 

14 emissions of that importer’s covered good. 

15 ‘‘(d) INTERNATIONAL NEGOTIATIONS.—The Sec16 retary of State and the United States Trade Representa17 tive shall engage with other countries regarding reducing 

18 global greenhouse gas emissions through trade and ensur19 ing fairness in the application of emissions-based tariffs. 

20 ‘‘(e) ADDITIONAL SECTORS.—The Secretary (in con21 sultation with the Director of the Office of Management 

22 and Budget, the Secretary of Commerce, the Secretary of 

23 Energy, the Administrator, the Secretary of Agriculture, 

24 the Secretary of Transportation, the Secretary of the Inte25 rior, and the United States Trade Representative) shall, 


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1 for purposes of section 9901(15)(C), annually identify any 

2 product for which the Secretary determines— 

3 ‘‘(1) there is reliable data for determining the 

4 production greenhouse gas emissions of such prod5 uct, and 

6 ‘‘(2) that it is in the interest of the United 

7 States to include such product under section 

8 9901(15) for purposes of application of the border 

9 carbon adjustment with respect to such product. 

10 ‘‘SEC. 9906. ALLOCATION OF CARBON BORDER FEE ADJUST11 MENT REVENUES. 

12 ‘‘With respect to the revenues collected under section 

13 9904— 

14 ‘‘(1) such revenues shall be used to supplement 

15 appropriations made available in fiscal year 2024 

16 and each fiscal year thereafter to U.S. Customs and 

17 Border Protection, in such amounts as are necessary 

18 to administer the border carbon adjustment, and 

19 ‘‘(2) from any amounts remaining following any 

20 supplemental appropriation made with respect to 

21 amounts described in paragraph (1)— 

22 ‘‘(A) 50 percent of such amounts remain23 ing shall be used to provide grants to States as 

24 prescribed in section 3 of the FAIR Transition 

25 and Competition Act, and 


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1 ‘‘(B) 50 percent of such amounts remain2 ing shall be available, as provided by appropria3 tion Acts, for making expenditures to support 

4 the high-impact research, development, dem5 onstration, technology transfer, commercializa6 tion, and export of technologies that reduce or 

7 eliminate greenhouse gas emissions.’’. 

8 SEC. 3. RESILIENT COMMUNITIES GRANT PROGRAM. 

9 (a) IN GENERAL.—The Secretary shall provide to 

10 each State a Resilient Communities Grant no later than 

11 April 1, 2025, and each calendar year thereafter, in an 

12 amount determined under subsection (c). 

13 (b) ELIGIBLE PURPOSES.—A State receiving a Resil14 ient Communities Grant under this section shall use the 

15 amount of each such grant as follows: 

16 (1) To provide job training and worker transi17 tion assistance, with priority given to workers and 

18 former workers in fossil fuel-related industries. 

19 (2) To assist municipalities, counties, or other 

20 political subdivisions of the State in— 

21 (A) developing climate vulnerability assess22 ments and adaptation plans to help build resil23 ience to rapid-onset and slow-onset climate haz24 ards; and 


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1 (B) implementing such plans, which may 

2 include but are not limited to such projects as 

3 climate-smart infrastructure, agricultural cli4 mate solutions, and natural climate solutions to 

5 build climate resilience and support carbon se6 questration. 

7 (3) To directly assist frontline communities who 

8 are experiencing the earliest, most severe threats 

9 from climate change with technical assistance and 

10 resources to undertake efforts to build climate resil11 ience. 

12 (4) Alleviate historical burdens imposed upon 

13 communities of color, low-income communities, Trib14 al and Indigenous communities, fossil fuel-dependent 

15 communities, and other vulnerable populations that 

16 have been historically under-resourced due to inequi17 ties in resource allocation or disproportionately bur18 dened by environmental hazards, including exposure 

19 to climate risks and polluted air, waterways, and 

20 landscapes. 

21 (5) To provide relocation assistance to individ22 uals and populations when climate change or the en23 ergy transition threatens their health, well-being, or 

24 livelihood. 


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1 (6) To assist small businesses that are dis2 proportionately impacted by the border carbon ad3 justment imposed under subtitle L of the Internal 

4 Revenue Code of 1986 (as added by section 2 of this 

5 Act). 

6 (c) AMOUNT OF GRANT.— 

7 (1) IN GENERAL.—The amount of the Resilient 

8 Communities Grant made to any State for any cal9 endar year shall be equal to the product of— 

10 (A) the total amount made available under 

11 section 9906(2)(A) of the Internal Revenue 

12 Code of 1986 (as added by this Act) based on 

13 revenue collected in the prior calendar year; and 

14 (B) the State allocation percentage for the 

15 State (as determined under paragraph (2)). 

16 (2) STATE ALLOCATION PERCENTAGE.—Not 

17 later than December 1, 2024, and each calendar 

18 year thereafter, the Secretary (in coordination with 

19 the Administrator of the Environmental Protection 

20 Agency, the Secretary of Commerce, the Secretary of 

21 Labor, the Secretary of Homeland Security, the Sec22 retary of Transportation, the Secretary of Agri23 culture, and the Secretary of Energy) shall establish 

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1 centage for the following calendar year, which, for 

2 each State, shall take into account— 

3 (A) the percentage of the population of the 

4 United States residing in such State; 

5 (B) the vulnerability of such State to cli6 mate change; and 

7 (C) the percentage of the total United 

8 States workforce employed in fossil fuel-related 

9 industries who are employed in such industries 

10 in such State. 

11 (3) CLIMATE VULNERABILITY.—In accounting 

12 for the vulnerability of each State to climate change 

13 under paragraph (2)(B) for the purposes of deter14 mining the State allocation percentage, the parties 

15 identified in paragraph (2) shall— 

16 (A) at a minimum, consider the potential 

17 risks from rapid-onset and slow-onset climate 

18 hazards to— 

19 (i) human health and safety; 

20 (ii) infrastructure and other physical 

21 assets; and 

22 (iii) natural and agricultural systems; 

23 (B) account for the disproportionate im24 pact of climate change on socially vulnerable 

25 communities; 


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1 (C) ensure the methods for determining 

2 climate vulnerability do not result in a formula 

3 for State allocation that inequitably allocates 

4 resources to specific communities based on race, 

5 socioeconomic status, or other such characteris6 tics; and 

7 (D) utilize relevant components of existing 

8 metrics and indicators of climate vulnerability 

9 in the United States wherever possible, includ10 ing but not limited to— 

11 (i) the FEMA National Risk Index; 

12 and 

13 (ii) over the past 5 years, the State’s 

14 proportion of— 

15 (I) National Flood Insurance 

16 Program claims; 

17 (II) Fire Mitigation Assistance 

18 Grants; and 

19 (III) USDA fast track drought 

20 designations. 

21 (4) MINIMUM STATE ALLOCATION.—For pur22 poses of subparagraph (B), the State allocation per23 centage for any State shall not be less than 1 per24 cent. 


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1 (5) VERIFICATION.—The Secretary shall verify 

2 the State use of grants under this subsection to en3 sure such uses comply with the requirements of this 

4 section. The Secretary may withhold a grant under 

5 this subsection if the Secretary determines that a 

6 State has not complied with such requirements. 

7 (d) DEFINITIONS.—In this section: 

8 (1) SECRETARY.—The term ‘‘Secretary’’ means 

9 the Secretary of the Treasury or the Secretary’s del10 egate. 

11 (2) SLOW-ONSET CLIMATE HAZARD.—The term 

12 ‘‘slow-onset climate hazard’’ means a threat from 

13 climate change that evolves gradually due to incre14 mental change or because of an increasing frequency 

15 or intensity of recurring climate impacts, includ16 ing— 

17 (A) sea level rise; 

18 (B) desertification; 

19 (C) biodiversity loss; 

20 (D) increasing temperatures; 

21 (E) ocean acidification; 

22 (F) soil salinization; 

23 (G) drought; 

24 (H) land and natural resource degradation; 


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1 (I) glacial retreat or reduced snow pack, 

2 and related impacts; and 

3 (J) permafrost thaw. 

4 (3) STATE.—The term ‘‘State’’ means any of 

5 the 50 States, the District of Columbia, or the Com6 monwealth of Puerto Rico. 

Æ 


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