Clean Competition Act
- Bill Number
- S. 3523
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-12-17: Read twice and referred to the Committee on Finance.
- Last Updated
- 2026-03-19T15:15:56Z
AI-Generated Summary
Purpose
The Clean Competition Act aims to reduce greenhouse gas emissions from energy-intensive industries by imposing charges based on the carbon intensity (emissions per unit of production) of goods. It creates a border adjustment mechanism to level the playing field between domestic and imported high-carbon goods, encourages global decarbonization through international agreements, and funds investments in low-carbon technologies and international climate assistance. The goal is to promote cleaner industrial production while supporting U.S. competitiveness and exports.
Key Provisions
- Carbon Intensity Calculation (Section 4691): Requires U.S. facilities in covered industries (e.g., steel, cement, chemicals) to report emissions, electricity use, and production data annually starting June 30, 2026. Carbon intensity is calculated as total emissions (including from electricity) divided by production quantity. For imports, it uses defaults based on the exporting country's economy, industry data if available, or estimates. Petitions allow for customized calculations or exclusions for specific goods.
- Imposition of Carbon Intensity Charge (Section 4692):
- Applies to imported and domestically produced "covered primary goods" (e.g., steel, aluminum, cement) starting 2026, and to "finished goods" (products heavily reliant on these inputs) starting 2028.
- Charge equals the excess carbon intensity over a declining baseline (starting at 100% of 2025 U.S. levels, phasing to 0% by 2048) multiplied by production/import quantity and a "cost of pollution" fee ($60 per ton CO2-equivalent in 2026, adjusted annually for inflation plus 6%).
- Exempts goods from least developed countries (unless they dominate global exports) and waives charges for countries with equivalent carbon pricing.
- Allows credits for direct air capture of emissions, capped to prevent over-reduction.
- Rebates (Section 4693): Refunds charges on exported U.S. goods, but withholds if the importing country credits the charge against its own tariffs. Prevents "resource shuffling" (shifting production to evade charges).
- Carbon Clubs (Section 4694): Enables the President to negotiate agreements with countries committing to aligned carbon measurement, labor rights, and decarbonization policies. Benefits include waived charges for compliant countries; prioritizes emissions reductions and U.S. access to low-carbon materials.
- Definitions (Section 4695): Covers specific industries (e.g., NAICS codes for petroleum, steel); defines terms like "CO2-e" (carbon dioxide equivalent, measuring gases' warming impact) and "finished goods" (products with high covered input content, thresholds tightening over time).
- Investments in Industrial Competitiveness (Section 2(c)):
- Establishes Department of Energy programs for grants, loans, and "contracts for difference" (subsidies bridging production costs to market prices) to deploy low-carbon tech, targeting 20%+ emissions cuts.
- Prioritizes high-impact projects, job creation, and distressed communities; requires 50% cost-sharing and labor standards.
- Auctions for contracts based on emissions reductions and cost efficiency.
- International Assistance (Section 2(d)): Allocates funds to the State Department for climate aid, prioritizing carbon club negotiations, support for developing countries, and global emissions cuts.
- Funding: Revenue from charges funds the programs; initial appropriations of $75 billion (Energy) and $25 billion (State) for FY2027, transitioning to 25% of charge revenues after $100 billion collected.
Significant Changes to Existing Law
- Amends the Internal Revenue Code (Chapter 38) by adding Subchapter E, introducing a new excise tax-like charge on carbon-intensive production and imports, distinct from existing fuel taxes or cap-and-trade proposals.
- Mandates expanded reporting under the EPA's Greenhouse Gas Reporting Program, overriding any funding restrictions.
- Creates novel mechanisms like carbon clubs and contracts for difference, not previously in U.S. tax or energy law, while integrating with existing frameworks (e.g., Clean Air Act definitions, 45Q carbon capture credits).
- Shifts from voluntary incentives (e.g., tax credits under the Inflation Reduction Act) to mandatory charges with phase-down baselines, promoting mandatory decarbonization.
Potential Impacts
- Government Agencies: Increases workload for Treasury (charge administration), EPA (emissions verification), Energy (tech investments), and State (international aid); generates revenue for climate programs but requires new regulations and interagency coordination.
- Citizens: May raise prices for imported and domestic goods in covered sectors (e.g., higher steel costs affecting construction/vehicles), but rebates and subsidies could lower energy bills long-term via cleaner production; benefits workers through job creation in low-carbon tech and community agreements.
- International Relations: Strengthens ties with allies via carbon clubs, but risks trade disputes (e.g., with high-emission exporters like China); promotes global emissions cuts and aid to developing nations, potentially enhancing U.S. diplomatic leverage on climate.
Main Stakeholders
- Domestic Producers (Covered Entities): Facilities in 20+ industries (e.g., steel mills, refineries) face charges but gain from rebates, subsidies, and competitiveness boosts.
- Importers and Exporters: Pay charges on high-carbon imports; exporters receive refunds, favoring low-carbon U.S. goods.
- Foreign Countries and Manufacturers: Subject to import charges unless in carbon clubs; least developed nations largely exempt, but major exporters (e.g., if >3% global share) affected.
- Consumers and Workers: Indirectly impacted via product prices and job opportunities in green industries.
- Environmental and Labor Groups: Benefit from emissions reductions and required labor standards.
- Government Entities: Treasury, EPA, DOE, State Department, and U.S. Trade Representative handle implementation and enforcement.
Notable Legal, Constitutional, or Political Implications
- Legal: Relies on Congress's taxing power (Article I, Section 8); could face challenges under WTO rules as a trade barrier, though designed as environmental adjustment. Requires robust data verification to avoid disputes over calculations.
- Constitutional: No direct issues, but interagency coordination and presidential negotiation authority (for carbon clubs) test separation of powers; exemptions for developing countries align with international obligations.
- Political: Advances U.S. climate goals without broad domestic carbon tax, appealing to bipartisanship on trade/competitiveness; may polarize along industry (e.g., fossil fuels vs. renewables) and international lines, with phase-in allowing adaptation but long-term (to 2048) commitment signaling strong policy shift.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Sen. Whitehouse, Sheldon [D-RI]
Cosponsors (5)
Sen. Blumenthal, Richard [D-CT], Sen. Heinrich, Martin [D-NM], Sen. Schatz, Brian [D-HI], Sen. Welch, Peter [D-VT], Sen. Van Hollen, Chris [D-MD]
Recent Actions
- 2025-12-17: Read twice and referred to the Committee on Finance.
- 2025-12-17: Introduced in Senate
Bill Versions
- Clean Competition Act — issued 2025-12-17 — PDF (73 pages)