A bold piece of legislation—the Foreign Pollution Fee Act of 2025—is quietly making waves in Washington. Sponsored by Bill Cassidy and Lindsey Graham, the bill introduces pollution-based import fees on carbon-intensive products. It could reshape trade as we know it.
The legislation targets countries like China, Russia, India, and Vietnam, where manufacturing emissions far exceed U.S. standards. Products like steel, glass, and fertilizers would face fees as high as 200%. The goal? Level the playing field for U.S. manufacturers who already comply with stricter environmental regulations.
American businesses are currently spending an estimated $400 billion annually on environmental compliance. The bill recognizes that and aims to protect U.S. industry from cheaper, dirtier imports. In doing so, it throws support behind domestic carbon capture and removal efforts.
The proposal comes during a volatile time in trade. Just last week, China was slapped with a 145% tariff—only to retaliate with a 125% tariff of its own. The Foreign Pollution Fee Act adds another layer to that tension, this time framed around carbon.
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Here’s the interesting part: companies can lower these proposed fees if they invest in carbon capture and removal. That includes either capturing CO₂ directly on-site or purchasing certified carbon removal credits.
But there’s a catch—only durable removal technologies like direct air capture or marine carbon removal qualify. Forest offsets? Considered too temporary and weighted less.
To avoid fees, producers must invest in U.S.-based carbon removal, or partner with approved allies. Projects linked to "foreign entities of concern" (especially China) are disqualified. This creates both a compliance tool and a market driver for North American-based carbon removal startups.
The U.S. carbon management industry has long relied on the 45Q tax credit. But its future is uncertain.
Scott Perry and Ro Khanna are pushing to repeal it, calling it a costly giveaway to fossil fuel interests. Meanwhile, critics say 45Q could cost taxpayers up to $835 billion over 18 years.
If 45Q goes away, the Foreign Pollution Fee Act could become the next major financial lever for carbon removal in the U.S. And because it’s fee avoidance, not a direct subsidy, it may attract broader support from fiscal conservatives.
The bill bears a strong resemblance to the European Union’s Carbon Border Adjustment Mechanism (CBAM). CBAM requires companies to report the carbon content of goods like steel and fertilizer.
Starting in 2026, EU importers must purchase CBAM certificates based on their product’s emissions. Recent revisions to CBAM have made compliance easier, especially for small businesses. But it still signals a hard pivot toward climate-linked trade policy.
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The bill’s backers—Cassidy and Graham—hail from Louisiana and South Carolina, states deeply tied to oil, gas, and heavy industry. Their motivation is clear: protect local jobs while pushing global polluters to clean up.
But passing it won’t be easy. They’ll need bipartisan support, especially from Republicans hesitant about carbon policy. Still, the act’s appeal as a fairness mechanism rather than a green mandate could win votes.
If enacted, this bill could force a realignment in global trade. Countries with low-emissions supply chains would gain an edge. Those that rely on coal-heavy production could see their goods priced out of U.S. markets.
The legislation also sends a clear signal to supply chains: clean up, or pay up. For companies on the fence about investing in carbon removal or capture tech, this might be the nudge they needed.
Ryan Fitzpatrick, director of climate and energy at Third Way, told Bloomberg earlier this year: "Border carbon adjustments are how the U.S. can lead in climate without undercutting its own industries."
With projects like Occidental’s DAC facility and CarbonCure’s concrete capture systems, American startups could benefit from this shift. It may even offset some of the chill caused by uncertainty over 45Q.
And unlike forest-based credits that struggle with permanence, many new CDR technologies offer measurable, verifiable outcomes. If the market shifts to demand those outcomes, the U.S. is well-positioned to lead.
The Foreign Pollution Fee Act isn’t just about tariffs—it’s about defining the future of clean trade. Whether it passes or not, it signals where global policy is heading.
Clean manufacturing, durable carbon removal, and transparent supply chains are no longer optional. They’re becoming the price of doing business.
And in this case, those who move first—especially those in North America—might just shape the rules of the game.
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