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In the context of a US upstream GHG tax, our 2020 Framework and related Policy Guidance reports propose a Framework to create and implement border tax adjustments (BTAs)—export rebates and import charges for covered greenhouse gas (GHG) intensive products—consistent with US obligations under the World Trading Organization (WTO). They provide background and details on internationally recognized methodologies to determine GHG emissions from facilities and how they can be used to create WTO-compatible BTAs for GHG-intensive products eligible for and subject to BTAs.

The GHG index (GGI) is a central concept and administrative index proposed in the Framework that is used to determine BTAs for covered products. Given the GGI (with units of carbon dioxide-equivalent [CO2e] per tonne of product) of a covered domestic product, the rate for its export rebate (US$ per tonne of product) is given by the GGI multiplied by the GHG tax rate (US$ per tonne CO2). Similarly, for a covered imported product, the import charge is the US GHG tax rate multiplied by its GGI. GGI values for like products produced by different manufacturers in different ways (e.g., using different natural resources, technologies, processes, sources of thermal energy, and electricity) can have significantly varied GGI values. While like products will be taxed at the same US GHG rate, the amount of the import charge or export rebate will differ depending on the product’s GGI. Section 3.6 of the Framework report details how GGI is determined in a manner analogous to value-added taxes (VATs), but here we apply it to propagation of the upstream sources of taxed emissions.

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