“You could bring back the kind of trade friction that has characterized the US-EU relationship with tit-for-tat solutions, and I think that’s a problem,” said John Podesta, who was President Barack Obama’s senior climate adviser and is in frequent contact with Biden officials. “The bilateral relationship between the United States and European democracy is perhaps the most important relationship right now in creating a structure to solve these global problems, and that is why it is somewhat of a test. for it. Can we pull ourselves together now? “

Biden has made tackling climate change one of his administration’s top priorities, but the United States is miles away from the European Union, which has created a world-wide carbon trading system. block to wean oneself from the greenhouse gases which play the biggest role in global warming. As the EU tightens its carbon emissions regulations, it is reluctant to allow foreign companies that face no climate-related costs at home to flood its market with cheaper products.

The tariffs the EU is expected to offer on Wednesday will leave Biden with a grim set of options. The White House could take a page from Trump’s business playbook and impose its own retaliatory tariffs, or it could seek to challenge the EU’s decision by resurrecting the hindered dispute settlement body of the World Trade Organization, an option strongly opposed by proponents of US climate policy.

“Are we really going to let an unelected international body dictate whether we act on the climate and on jobs?” That would be foolish, “said National Wildlife Federation CEO Collin O’Mara, who is close to the White House climate team and said he had discussed the subject of trade” more over the past two years. last few weeks than the last two years ”on the Hill. and with the administration.

Much of the conversation in US climate policy circles centers on how to act on vague promises made by Biden in last year’s campaign to impose fees on high-carbon imports. . The impending EU proposal has prompted environmental groups and the Biden administration to speed up their political talks after dialogue with EU officials failed to slow the roll-out of tariffs, as US officials l ‘had hoped.

The EU and the US insist that any climate trade policy must remain in line with WTO rules. Podesta said the EU had pushed for the WTO to facilitate a conversation with the United States on carbon tariffs.

But the WTO has essentially been on the back burner since the Trump administration blocked the appointment of new members to fill its appeals body. The Biden administration was not enthusiastic about his track record, and his trade policy agenda indicated that the US Trade Representative would address “systemic issues” with the WTO Appeal Board, which has been missing since 2019, mainly in due to disagreements over how she handled tariffs.

Green groups fear that the WTO has also tended to ignore environmental issues when resolving disputes.

“The WTO’s track record in climate and environmental protection does not inspire much confidence that this body should speak out on countries’ efforts to tackle the climate crisis,” said Ben Beachy, program director Sierra Club Living Economy.

The EU plan is expected to impose fees on imports of aluminum, steel, electricity, cement and some fertilizers from countries that do not have their own national measures to tackle climate change, according to a disclosed project obtained by POLITICO.

In addition to protecting the EU’s own industries, the move aims to push the bloc’s trading partners to adopt carbon pricing schemes or comparable measures, although it can be difficult to judge whether the systems would be weaker. or stronger than the EU’s own carbon rules.

Climate policy advocates fear that tariffs are a blunt and aggressive instrument that could trigger a backlash.

Climate policy veterans Podesta and Laurence Tubiana, the French diplomat who helped secure the Paris climate deal in 2015, have tried to reduce friction between allies and avoid a repeat of the 2012 decision. of the EU to unilaterally tax airline emissions for all flights entering or leaving the bloc. These charges have met with strong opposition from US airlines and the Obama administration.

The two brought together senior European and American officials in May for behind-the-scenes discussions on border taxes, said Trevor Sutton, senior national security researcher at the Center for American Progress, the think tank founded by Podesta. Sutton said the meeting highlighted the stark differences in climate policies between the EU and the United States, and that Europe was on track to complete its proposal, as the Biden administration barely had started to design his policy.

“The EU threw in the gauntlet. They will do it. It’s going to send shock waves, ”Sutton said. But the design of the policy is likely to attract a challenge at the WTO, Sutton noted, leaving many US environmental groups to think that crafting climate-related policy to appease the WTO is not worth it. ‘worry when almost anything attracts an objector.

“When you talk to some of the environmentalists here, their mindset is ‘f — the WTO’,” he said.

Those familiar with the discussions with the U.S. government on how to respond to the EU say U.S. Trade Representative Katherine Tai and her team are taking the lead, with help from the National Security Council, Department of Commerce, National Climate Advisor Gina McCarthy and Office of Presidential Special Envoy for Climate John Kerry at the Department of State.

Kerry said in March he was “concerned” about a border carbon tax and called it a “last resort” that could escalate tensions ahead of crucial UN climate talks in November. Dialogue between Kerry and his European counterpart Frans Timmermans continued, with Kerry subsequently softening his comments to express reservations about the “downstream” economic effects.

Sue Biniaz, a senior official in Kerry’s office at the National Security Council, bristled at unilateral EU action, according to a person familiar with his thinking. That person said Biniaz believed The EU’s focus on aligning trading partners with its emissions trading system has focused more on policy outcomes than climate benefits, which has raised questions about its WTO compatibility.

The EU has since taken a step backwards, indicating that it would allow the United States and other countries that do not have national carbon prices to potentially avoid tariffs if they implement any other regulatory measures, although it insists that any corresponding policies comply with WTO requirements. Against this backdrop, trade experts told POLITICO, other countries would need a national carbon price to tie into the EU system – if the WTO even approved the EU regime, which is questionable given its dependence on emission allowances for industry.

“Our partners can use different methods, they can use regulation, they can use taxation, it doesn’t matter what kind of action you take, if you take action to make sure you are aiming for the same goal, which is neutrality. climate in 2050, then you can avoid being targeted by a carbon border adjustment mechanism, ”Timmermans said at an event last month.

The Biden administration will likely turn back the clock. Tai, whose office touted carbon tariffs in its annual strategic plan, refused to rule out retaliation. His office has not commented on this story.

Some environmentalists and progressives are pressuring the USTR to consider the kind of trade tactics deployed by the Trump administration, using climate change as a rationale for national security. Some suggest that the Section 232 tariffs, which Trump used against EU steel and aluminum, and the 301 tariffs would achieve these goals, because US companies that produce steel and others items emit less greenhouse gases than many foreign competitors, including those from the EU and China.

WTO challenges would be unable to thwart such Trump-style retaliation because the trade body’s dying appeal board is unable to resolve disputes.

“Trump has shown that the world doesn’t fall apart when you start to take a more interventionist approach,” said Todd Tucker, director of governance studies at the Liberal Roosevelt Institute, who advocated for trading partners to ‘agree on a common carbon tariff on goods. countries that fail to reduce manufacturing emissions. “He actually did something, and it actually improved the profitability of domestic companies. “

Some groups said that since products sold by U.S. exporters tend to have a lower carbon profile than their overseas competitors, they would fare better with a border carbon tax than others outside of the country. Europe.

The Blue-Green Alliance, a coalition of environmental and labor groups, argued to the administration that unionized workers would reap economic benefits from a border tax, with the United Steelworkers being strongly in favor.

And the Climate Leadership Council, a bipartisan group that includes major oil and gas producers and supports a carbon tax, argued the case during a briefing with the administration and White House officials who offered a “unilaterally positive reception “said Catrina Rorke, group vice president for policy. The council found that US products are 40% more carbon-efficient than average, ahead of China and India by three and four times, respectively.

“We saw a lot of unilateral action outside of what you would call WTO-compatible” during the Trump years, she said. “People are testing the limits of what they can achieve.”

Paola Tamma and Kalina Oroschakoff contributed to this report.