I 
117TH CONGRESS 
1ST SESSION H. R. 4534 
To amend the Internal Revenue Code of 1986 to establish a border carbon 
adjustment for the importation of certain goods. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 19, 2021 
Mr. PETERS (for himself and Mr. PANETTA) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committees on Science, Space, and Technology, Energy and 
Commerce, Foreign Affairs, and Education and Labor, for a period to 
be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to establish 
a border carbon adjustment for the importation of cer-
tain goods. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Fair, Affordable, Inno-
vative, and Resilient Transition and Competition Act’’ or 
the ‘‘FAIR Transition and Competition Act’’. 
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SEC. 2. BORDER CARBON ADJUSTMENT. 
The Internal Revenue Code of 1986 is amended by 
adding at the end the following new subtitle: 
‘‘Subtitle L—Border Carbon 
Adjustment 
‘‘CHAPTER 101—BORDER CARBON ADJUSTMENT 
‘‘CHAPTER 101—BORDER CARBON 
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. 
‘‘SEC. 9901. DEFINITIONS. 
‘‘For purposes of this subtitle: 
‘‘(1) ADMINISTRATOR.—The term ‘Adminis-
trator’ means the Administrator of the Environ-
mental Protection Agency. 
‘‘(2) BASELINE EMISSIONS.—The term ‘baseline 
emissions’ means the average greenhouse gas emis-
sions of a company’s relevant sector, as determined 
under section 9903(a). 
‘‘(3) 
BENCHMARK
EMISSIONS.—The 
term 
‘benchmark emissions’ means the greenhouse gas 
emissions of the highest emitting sites within a com-
pany’s relevant sector in the United States, as deter-
mined under section 9903(b). 
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‘‘(4) BORDER
CARBON
ADJUSTMENT.—The 
term ‘border carbon adjustment’ means the fee im-
posed pursuant to section 9904. 
‘‘(5) CO2-e.—The term ‘CO2-e’ means the num-
ber of metric tons of carbon dioxide emissions with 
the same global warming potential as one metric ton 
of another greenhouse gas. 
‘‘(6) COVERED FUEL.—The term ‘covered fuel’ 
means natural gas, petroleum, coal, or any other 
product derived from natural gas, petroleum, or coal 
that is used or may be used so as to emit green-
house gases to the atmosphere. 
‘‘(7) COVERED GOOD.—The term ‘covered good’ 
means a covered fuel or a product produced within 
a sector. 
‘‘(8) DOMESTIC
ENVIRONMENTAL
COST
IN-
CURRED.—The term ‘domestic environmental cost 
incurred’ means the amount determined under sec-
tion 9902. 
‘‘(9) GREENHOUSE GAS.—The term ‘greenhouse 
gas’ has the same meaning given such term under 
paragraph (3) of section 901 of the Energy Inde-
pendence and Security Act of 2007 (42 U.S.C. 
17321). 
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‘‘(10) GREENHOUSE GAS CONTENT.—The term 
‘greenhouse gas content’ means the amount of 
greenhouse gases, expressed in metric tons of CO2- 
e, which would be emitted to the atmosphere by the 
use of a covered fuel. 
‘‘(11) IMPORTED.—Irrespective of any other 
definition in law or treaty, the term ‘imported’ 
means to have landed on, brought into, or intro-
duced into any place subject to the jurisdiction of 
the United States from a person or place outside the 
United States. 
‘‘(12) IMPORTER.—The term ‘importer’ means 
a person who, for any reason, brings a product from 
a foreign country into the United States for con-
sumption, use, or warehousing. 
‘‘(13) PRODUCTION
GREENHOUSE
GAS
EMIS-
SIONS.—The term ‘production greenhouse gas emis-
sions’ means the quantity of greenhouse gases, ex-
pressed in metric tons of CO2-e, emitted to the at-
mosphere resulting from the production, manufac-
ture, or assembly of a product, as determined under 
section 9905. 
‘‘(14) 
SECRETARY.—The 
term 
‘Secretary’ 
means the Secretary of the Treasury, or the Sec-
retary’s delegate. 
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‘‘(15) SECTOR.—The term ‘sector’ means in-
dustrial facilities which produce one of the following 
products: 
‘‘(A) Steel. 
‘‘(B) Aluminum. 
‘‘(C) Cement. 
‘‘(D) Iron. 
‘‘(E) Any product identified pursuant to 
section 9905(e). 
‘‘(F) Any product for which greater than 
50 percent the composition of such product con-
sist of a product described in subparagraphs 
(A) through (E). 
‘‘(16) STATE.—The term ‘State’ means any of 
the 50 States, the District of Columbia, or the Com-
monwealth of Puerto Rico. 
‘‘(17) UPSTREAM
GREENHOUSE
GAS
EMIS-
SIONS.—The term ‘upstream greenhouse gas emis-
sions’ means the quantity of greenhouse gases, ex-
pressed in metric tons of CO2-e, emitted to the at-
mosphere resulting from the extraction, processing, 
transportation, financing, or other preparation of a 
covered fuel for use, as determined under section 
9905. 
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‘‘SEC. 9902. DETERMINATION OF DOMESTIC ENVIRON-
MENTAL COST INCURRED. 
‘‘Not later than July 1, 2023, and annually there-
after, the Secretary (in coordination with the Director of 
the Office of Management and Budget, the Secretary of 
Commerce, the Secretary of Energy, the Administrator, 
the Secretary of Agriculture, the Secretary of Transpor-
tation, the United States Trade Representative, and the 
Secretary of the Interior) shall determine the domestic en-
vironmental cost incurred for each sector, and for the pro-
duction of each covered fuel, based on the average cost 
incurred by companies within such sector (or, in the case 
of a covered fuel, the average cost incurred to produce 
such fuel) to comply with any Federal, State, regional, or 
local law, regulation, policy or program which is— 
‘‘(1) in effect at the time of such determination, 
including any such law, regulation, policy, or pro-
gram which is implemented after the date of enact-
ment of the FAIR Transition and Competition Act, 
and 
‘‘(2) designed to limit or reduce greenhouse gas 
emissions, including— 
‘‘(A) the Clean Air Act (42 U.S.C. 7401), 
‘‘(B) greenhouse gas emissions standards 
for passenger cars and light trucks, and 
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‘‘(C) any State, regional, or local law, reg-
ulation, policy, or program that imposes a cap- 
and-trade system with respect to, or a tax or 
fee on, carbon dioxide. 
‘‘SEC. 9903. DETERMINATION OF EMISSIONS FOR EACH SEC-
TOR. 
‘‘(a) BASELINE EMISSIONS.—Not later than July 1, 
2023, and annually thereafter, the Administrator shall de-
termine and publish the average greenhouse gas emissions 
of each sector during the prior calendar year in order to 
demonstrate the amount of progress made in reducing 
greenhouse gas emissions in the United States. 
‘‘(b) BENCHMARK EMISSIONS.—Not later than July 
1, 2023, and annually thereafter, the Administrator shall 
determine and publish the production greenhouse gas 
emissions for the top 1 percent of the emitting production 
sites within each sector in the United States during the 
prior calendar year. 
‘‘SEC. 9904. BORDER CARBON ADJUSTMENT. 
‘‘(a) BORDER CARBON ADJUSTMENT.—Beginning on 
January 1, 2024, in the case of any importer that imports 
a covered good into the United States, there shall be im-
posed a fee— 
‘‘(1) in the case of a covered fuel, in an amount 
equal to the product of— 
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‘‘(A) the domestic environmental cost in-
curred in the production of such fuel, multiplied 
by 
‘‘(B) the upstream greenhouse gas emis-
sions of such fuel, 
‘‘(2) in the case of a product produced within 
a sector which is not a covered fuel, in an amount 
equal to the product of— 
‘‘(A) the domestic environmental cost in-
curred for the sector in which such product was 
produced, multiplied by 
‘‘(B) the production greenhouse gas emis-
sions of the product, or 
‘‘(3) in the case of a product produced within 
a sector for which reliable data with respect to the 
production greenhouse gas emissions of such product 
is not available, in an amount equal to the product 
of— 
‘‘(A) the benchmark emissions for the sec-
tor which produced such product, multiplied by 
‘‘(B) the domestic environmental cost in-
curred for the sector in which such product was 
produced. 
‘‘(b) EXEMPTIONS.— 
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‘‘(1) IN
GENERAL.—Not later than July 1, 
2023, and annually thereafter, the Secretary shall 
publish an annual report which identifies all applica-
ble countries, with any covered good imported from 
an applicable country during the calendar year be-
ginning after the date of publication of such report 
to be exempt from the border carbon adjustment. 
‘‘(2) APPLICABLE
COUNTRIES.—For purposes 
of this subsection, the term ‘applicable country’ 
means— 
‘‘(A) any country included on the list of 
Least Developed Countries on the most recent 
Development Assistance Committee List of Of-
ficial Development Assistance Recipients pub-
lished by the Organisation for Economic Co-op-
eration and Development, and 
‘‘(B) any country which— 
‘‘(i) does not impose a border carbon 
adjustment on products produced or manu-
factured in the United States, and 
‘‘(ii) the Secretary (in coordination 
with the Secretary of State, the United 
States Trade Representative, the Secretary 
of Commerce, the Secretary of Energy, the 
Administrator, the Secretary of Agri-
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culture, the Secretary of Transportation, 
and the Secretary of the Interior) deter-
mines enforces laws and regulations de-
signed to limit or reduce greenhouse gas 
emissions that are at least as ambitious as 
Federal laws and regulations designed to 
limit or reduce greenhouse gas emissions. 
‘‘SEC. 9905. ADMINISTRATION OF BORDER CARBON ADJUST-
MENT. 
‘‘(a) IN GENERAL.—The Secretary (in consultation 
with the Administrator, the United States Trade Rep-
resentative, and the Secretary of Homeland Security) shall 
prescribe regulations and guidance to implement the bor-
der carbon adjustment. 
‘‘(b) METHODOLOGY.—In determining the production 
greenhouse gas emissions of a covered good, the Secretary 
shall use reliable methodologies which— 
‘‘(1) as may be necessary or convenient— 
‘‘(A) distinguish between different types of 
covered fuels, 
‘‘(B) distinguish between a covered fuel’s 
greenhouse gas content and that covered fuel’s 
upstream greenhouse gas emissions, 
‘‘(C) distinguish between the different 
types of greenhouse gas emissions which com-
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pose a covered fuel’s upstream greenhouse gas 
emissions, as well as the various processes 
which produced those emissions, and 
‘‘(D) distinguish between the different 
types of greenhouse gas emissions which com-
pose a covered good’s production greenhouse 
gas emissions, as well as the various processes 
which produced those emissions, 
‘‘(2) ensure that no covered good has the bor-
der carbon adjustment imposed upon it more than 
once, and 
‘‘(3) are consistent with international treaties 
and agreements, including free trade agreements. 
‘‘(c) PETITION PROCEDURE.—The Secretary shall es-
tablish fair, timely, impartial, and, to the extent necessary, 
confidential procedures by which the importer of any cov-
ered good may petition the Secretary to revise the Sec-
retary’s determination of the production greenhouse gas 
emissions of that importer’s covered good. 
‘‘(d) INTERNATIONAL
NEGOTIATIONS.—The Sec-
retary of State and the United States Trade Representa-
tive shall engage with other countries regarding reducing 
global greenhouse gas emissions through trade and ensur-
ing fairness in the application of emissions-based tariffs. 
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‘‘(e) ADDITIONAL SECTORS.—The Secretary (in con-
sultation with the Director of the Office of Management 
and Budget, the Secretary of Commerce, the Secretary of 
Energy, the Administrator, the Secretary of Agriculture, 
the Secretary of Transportation, the Secretary of the Inte-
rior, and the United States Trade Representative) shall, 
for purposes of section 9901(15)(C), annually identify any 
product for which the Secretary determines— 
‘‘(1) there is reliable data for determining the 
production greenhouse gas emissions of such prod-
uct, and 
‘‘(2) that it is in the interest of the United 
States to include such product under section 
9901(15) for purposes of application of the border 
carbon adjustment with respect to such product. 
‘‘SEC. 9906. ALLOCATION OF CARBON BORDER FEE ADJUST-
MENT REVENUES. 
‘‘With respect to the revenues collected under section 
9904— 
‘‘(1) such revenues shall be used to supplement 
appropriations made available in fiscal year 2024 
and each fiscal year thereafter to U.S. Customs and 
Border Protection, in such amounts as are necessary 
to administer the border carbon adjustment, and 
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‘‘(2) from any amounts remaining following any 
supplemental appropriation made with respect to 
amounts described in paragraph (1)— 
‘‘(A) 50 percent of such amounts remain-
ing shall be used to provide grants to States as 
prescribed in section 3 of the FAIR Transition 
and Competition Act, and 
‘‘(B) 50 percent of such amounts remain-
ing shall be available, as provided by appropria-
tion Acts, for making expenditures to support 
the high-impact research, development, dem-
onstration, technology transfer, commercializa-
tion, and export of technologies that reduce or 
eliminate greenhouse gas emissions.’’. 
SEC. 3. RESILIENT COMMUNITIES GRANT PROGRAM. 
(a) IN GENERAL.—The Secretary shall provide to 
each State a Resilient Communities Grant no later than 
April 1, 2025, and each calendar year thereafter, in an 
amount determined under subsection (c). 
(b) ELIGIBLE PURPOSES.—A State receiving a Resil-
ient Communities Grant under this section shall use the 
amount of each such grant as follows: 
(1) To provide job training and worker transi-
tion assistance, with priority given to workers and 
former workers in fossil fuel-related industries. 
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(2) To assist municipalities, counties, or other 
political subdivisions of the State in— 
(A) developing climate vulnerability assess-
ments and adaptation plans to help build resil-
ience to rapid-onset and slow-onset climate haz-
ards; and 
(B) implementing such plans, which may 
include but are not limited to such projects as 
climate-smart infrastructure, agricultural cli-
mate solutions, and natural climate solutions to 
build climate resilience and support carbon se-
questration. 
(3) To directly assist frontline communities who 
are experiencing the earliest, most severe threats 
from climate change with technical assistance and 
resources to undertake efforts to build climate resil-
ience. 
(4) Alleviate historical burdens imposed upon 
communities of color, low-income communities, Trib-
al and Indigenous communities, fossil fuel-dependent 
communities, and other vulnerable populations that 
have been historically under-resourced due to inequi-
ties in resource allocation or disproportionately bur-
dened by environmental hazards, including exposure 
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to climate risks and polluted air, waterways, and 
landscapes. 
(5) To provide relocation assistance to individ-
uals and populations when climate change or the en-
ergy transition threatens their health, well-being, or 
livelihood. 
(6) To assist small businesses that are dis-
proportionately impacted by the border carbon ad-
justment imposed under subtitle L of the Internal 
Revenue Code of 1986 (as added by section 2 of this 
Act). 
(c) AMOUNT OF GRANT.— 
(1) IN GENERAL.—The amount of the Resilient 
Communities Grant made to any State for any cal-
endar year shall be equal to the product of— 
(A) the total amount made available under 
section 9906(2)(A) of the Internal Revenue 
Code of 1986 (as added by this Act) based on 
revenue collected in the prior calendar year; and 
(B) the State allocation percentage for the 
State (as determined under paragraph (2)). 
(2) STATE
ALLOCATION
PERCENTAGE.—Not 
later than December 1, 2024, and each calendar 
year thereafter, the Secretary (in coordination with 
the Administrator of the Environmental Protection 
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Agency, the Secretary of Commerce, the Secretary of 
Labor, the Secretary of Homeland Security, the Sec-
retary of Transportation, the Secretary of Agri-
culture, and the Secretary of Energy) shall establish 
the formula for determining the State allocation per-
centage for the following calendar year, which, for 
each State, shall take into account— 
(A) the percentage of the population of the 
United States residing in such State; 
(B) the vulnerability of such state to cli-
mate change; and 
(C) the percentage of the total United 
States workforce employed in fossil fuel related 
industries who are employed in such industries 
in such State. 
(3) CLIMATE VULNERABILITY.—In accounting 
for the vulnerability of each State to climate change 
under paragraph (2)(B) for the purposes of deter-
mining the State allocation percentage, the parties 
identified in paragraph (2) shall— 
(A) at a minimum, consider the potential 
risks from rapid-onset and slow-onset climate 
hazards to— 
(i) human health and safety; 
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(ii) infrastructure and other physical 
assets; and 
(iii) natural and agricultural systems; 
(B) account for the disproportionate im-
pact of climate change on socially vulnerable 
communities; 
(C) ensure the methods for determining 
climate vulnerability do not result in a formula 
for State allocation that inequitably allocates 
resources to specific communities based on race, 
socioeconomic status, or other such characteris-
tics; and 
(D) utilize relevant components of existing 
metrics and indicators of climate vulnerability 
in the United States wherever possible, includ-
ing but not limited to— 
(i) the FEMA National Risk Index; 
and 
(ii) over the past 5 years, the State’s 
proportion of— 
(I) National Flood Insurance 
Program claims; 
(II) Fire Mitigation Assistance 
Grants; and 
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(III) USDA fast track drought 
designations. 
(4) MINIMUM
STATE
ALLOCATION.—For pur-
poses of subparagraph (B), the State allocation per-
centage for any State shall not be less than 1 per-
cent. 
(5) VERIFICATION.—The Secretary shall verify 
the State use of grants under this subsection to en-
sure such uses comply with the requirements of this 
section. The Secretary may withhold a grant under 
this subsection if the Secretary determines that a 
State has not complied with such requirements. 
(d) DEFINITIONS.—In this section: 
(1) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of the Treasury or the Secretary’s del-
egate. 
(2) SLOW-ONSET CLIMATE HAZARD.—The term 
‘‘slow-onset climate hazard’’ means a threat from 
climate change that evolves gradually due to incre-
mental change or because of an increasing frequency 
or intensity of recurring climate impacts, includ-
ing— 
(A) sea level rise; 
(B) desertification; 
(C) biodiversity loss; 
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(D) increasing temperatures; 
(E) ocean acidification; 
(F) soil salinization; 
(G) drought; 
(H) land and natural resource degradation; 
(I) glacial retreat or reduced snow pack, 
and related impacts; and 
(J) permafrost thaw. 
(3) STATE.—The term ‘‘State’’ means any of 
the 50 States, the District of Columbia, or the Com-
monwealth of Puerto Rico. 
Æ 
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