A new bill introduced in the United States—dubbed the Foreign Pollution Fee Act of 2025—could bring a major shake-up to global trade by introducing tariffs tied to the emissions profile of imported goods. Backed by Senators Bill Cassidy and Lindsey Graham, the proposal is part of a broader push to support American manufacturers who operate under stricter environmental regulations.
The bill outlines a fee structure based on how much more carbon-intensive foreign goods are compared to similar products made in the U.S. Countries with higher emissions—such as China, Russia, Vietnam, India, and Taiwan—could see tariffs on goods like steel, aluminium, fertilisers, and glass climb to as much as 200%.
Draft text from the bill claims that American companies currently spend around $400 billion annually to meet environmental compliance standards. The proposed policy seeks to “level the playing field” by penalising imports from countries with looser environmental oversight. China and Russia are called out specifically for producing goods that emit three to five times more CO₂ than their U.S. equivalents.
To offset these fees, the bill encourages investment in carbon management. Companies could reduce their tariff liability by using certified carbon capture or carbon dioxide removal (CDR) solutions—ranging from direct air capture to marine-based removal technologies. Only permanent removals will qualify, with nature-based offsets like forest projects receiving a lower score. Moreover, eligible CDR activities must take place within the U.S. or its approved partner nations, excluding projects linked to ‘foreign entities of concern,’ particularly in China.
The Foreign Pollution Fee Act lands amidst wider uncertainty in U.S. carbon policy. The 45Q tax credit—long used to incentivise carbon capture—is under fire from both sides of the aisle, with criticism over its cost, estimated at $835 billion across 18 years. Meanwhile, other regions are moving forward. Europe’s Carbon Border Adjustment Mechanism (CBAM) is entering its next phase, requiring importers to pay for the embedded carbon in their goods from 2026 onwards.
Even as its legislative fate remains unclear, the U.S. proposal underscores a powerful message: carbon intensity is becoming a key variable in global trade. For industries worldwide, reducing emissions may soon be as much about staying competitive as it is about sustainability.