The Clean Competition Act: What It Is & How It Works

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Table of Contents#

1. What Is the Clean Competition Act (CCA)?
2. Core Policy Goals of the CCA
3. How the Clean Competition Act Works: Step-by-Step Breakdown
4. Key Sectors Covered by the CCA
5. Expected Impacts of the CCA 5.1 For Domestic U.S. Businesses 5.2 For Global Trade and Climate Action 5.3 For Consumers
6. Common Misconceptions About the CCA
7. Next Steps for Implementation
8. Final Takeaways
9. References

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1. What Is the Clean Competition Act (CCA)?#

First introduced in the U.S. Senate by Senator Sheldon Whitehouse (D-RI) in 2022 and reintroduced bicamerally in December 2023, the CCA was updated and reintroduced in the 119th Congress in December 2025 by Senator Whitehouse and Congresswoman Suzan DelBene (D-WA). The CCA is a border carbon adjustment policy that applies a fee to high-emission imported goods based on their carbon footprint, relative to the carbon intensity of equivalent U.S.-made goods.

Unlike arbitrary tariffs, the CCA is explicitly designed to treat domestic and foreign producers equally: U.S. manufacturers already pay implicit carbon costs via federal and state emission regulations, and the CCA ensures foreign producers pay the same equivalent cost for the emissions generated to make their products, even if their home country has no climate rules. It also avoids double taxation by allowing importers to deduct any carbon prices already paid in their country of origin from CCA fees owed.

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2. Core Policy Goals of the CCA#

The legislation was drafted to deliver four key, aligned outcomes:

1. Eliminate carbon leakage: Prevent companies from moving high-emission production abroad to avoid U.S. climate compliance costs
2. Level the playing field for U.S. manufacturers: Ensure low-carbon U.S. producers are not undercut by cheaper, high-emission imported goods from countries with weak climate rules
3. Incentivize global industrial decarbonization: Push U.S. trade partners to adopt stronger emission reduction rules and decarbonize their industrial sectors to avoid paying CCA fees
4. Support industrial decarbonization: Direct revenue from CCA fees to domestic decarbonization programs and international climate assistance, reinvesting in the very industries the policy covers to accelerate the transition to low-carbon manufacturing

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3. How the Clean Competition Act Works: Step-by-Step Breakdown#

The CCA’s framework is transparent and easy to follow for both regulators and importers:

Step 1: Set carbon intensity benchmarks#

The U.S. Department of the Treasury, with support from the EPA, Department of Energy, and Census Bureau, calculates sector-specific carbon intensity benchmarks based on the average lifecycle emission rate (scope 1 and scope 2 emissions) of U.S.-produced goods in each covered sector. The benchmark for each industry is initially set at the U.S. average carbon intensity from the year of enactment, then declines by 2.5 percentage points per year from 2027 through 2030, and by 5 percentage points per year starting in 2031, reaching zero intensity in 2048.

Step 2: Verify import carbon intensity#

The carbon intensity of imported goods is assessed using a tiered system depending on data availability in the country of origin. For opaque economies without reliable data, the fee is calculated based on the country's economy-wide carbon intensity relative to the U.S. For transparent economies with trustworthy emissions data, industry-specific carbon intensity data may be used, and individual manufacturers may petition to use their own facility-level data. Countries that control more than 10 percent of U.S. imports in a given industry receive a best-estimate assessment prepared by Treasury.

Step 3: Calculate applicable fees#

The fee per unit of imported good is calculated using the formula:

Fee = (Imported good carbon intensity - U.S. benchmark intensity) × Carbon intensity charge rate Note: Any carbon price already paid by the producer in their home country is fully deducted from the final fee owed.

The carbon intensity charge starts at $60 per metric ton of CO₂e and increases annually by 6 percent above inflation. For example: If a ton of imported steel has a carbon intensity of 2 tons of CO₂e, the U.S. benchmark for steel is 1 ton of CO₂e per ton, the base fee is$60 per ton of steel. If the foreign producer already paid a $30 per ton carbon tax in their home country, the final fee owed is$30 per ton.

Step 4: Revenue allocation#

All fees collected under the CCA are reinvested in industrial decarbonization through two priority programs:

• 75% goes to the Department of Energy, which administers grants, rebates, low-interest loans, and contracts for difference to help domestic manufacturers upgrade facilities and reduce their carbon intensity
• 25% goes to the Department of State to fund bilateral and multilateral decarbonization assistance, supporting the development of low-carbon industrial supply chains abroad and the negotiation of international carbon club agreements

$100 billion is pre-appropriated at enactment to enable rapid disbursal, with additional amounts made available once the carbon intensity charge has generated that amount in revenue.

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4. Key Sectors Covered by the CCA#

The CCA initially covers carbon-intensive, trade-exposed (CITE) sectors that face the highest risk of carbon leakage. The covered sectors, as identified by the legislation using six-digit North American Industry Classification System (NAICS) codes, include:

1. Iron and steel
2. Aluminum
3. Cement
4. Chemicals (including petrochemicals, adipic acid, and ethyl alcohol)
5. Glass
6. Nitrogen-based fertilizers
7. Paper and pulp
8. Fossil fuel extraction and refining (petroleum, natural gas, and coal)

Additional products such as hydrogen, lime and gypsum, and asphalt manufacturing are also covered.

Starting in 2028, the CCA will also cover imported finished goods that contain substantial amounts of covered primary goods—for example, cars with high steel content or appliances with significant aluminum components. The threshold for finished goods coverage begins at products containing 1,000 pounds of covered primary goods or comprising more than 90 percent by value of covered inputs, with thresholds dropping to 500 pounds and 75 percent in 2030.

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5. Expected Impacts of the CCA#

5.1 For Domestic U.S. Businesses#

• Low-carbon U.S. producers gain a competitive advantage over high-emission foreign competitors, as the domestic performance fee creates an incentive for dirtier U.S. firms to clean up while cleaner firms face no fee
• Small and medium manufacturers get access to dedicated grant funding, rebates, low-interest loans, and contracts for difference to decarbonize without raising operating costs
• The CCA's domestic performance fee is projected to reduce U.S. CITE sector emissions by approximately 8 percent, driven by decreased energy intensity of production and improvements in industrial processes

5.2 For Global Trade and Climate Action#

• The policy is aligned with the EU's Carbon Border Adjustment Mechanism (CBAM), which entered its definitive phase on January 1, 2026, and similar policies under development in Canada, Japan, Australia, and the UK, reducing cross-Atlantic trade friction and creating a growing bloc of countries using trade rules to drive decarbonization
• Independent models project the CCA will reduce global industrial emissions by 81 million metric tons of CO₂e in its first year, rising to 140 million metric tons by the tenth year, with U.S. reductions accounting for the majority of global gains
• The CCA's climate club provisions can amplify global reductions significantly: modeling shows that an OECD-wide climate club could reduce global CITE emissions by 3.2 percent, while inclusion of major emerging economies could achieve a 24.2 percent reduction
• It incentivizes emerging economies to adopt industrial decarbonization policies to maintain access to the U.S. market, the largest consumer market in the world

5.3 For Consumers#

• Short-term price impacts are expected to be limited: the CCA applies primarily to intermediate industrial goods, not finished consumer products, and the policy is projected to have virtually no effect on U.S. GDP, with modeling showing a slight increase in GDP and welfare
• Over time, the policy shifts trade toward lower-carbon-intensity countries, which can reduce supply chain carbon footprints for consumer goods without imposing broad new costs on households

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6. Common Misconceptions About the CCA#

Misconception 1: It’s a broad new tax on all imports#

The CCA only applies to carbon-intensive, trade-exposed sectors such as steel, aluminum, cement, chemicals, and fossil fuels, and fees are only charged if imported goods have a higher carbon intensity than equivalent U.S.-made goods. No fees apply to low-carbon imports, even from countries with weak climate rules.

Misconception 2: It will start a global trade war#

The CCA is designed to be fully compliant with WTO rules, as it applies the same implicit carbon cost to domestic and foreign producers. It has already received positive feedback from the EU and other U.S. trade partners that are implementing similar border carbon policies.

Misconception 3: It only benefits large corporate manufacturers#

75% of CCA revenue is dedicated to domestic decarbonization programs—including grants, rebates, low-interest loans, and contracts for difference for manufacturers of all sizes to reduce their carbon intensity—and 25% goes to international decarbonization assistance, not large corporate tax breaks. The legislation also authorizes the President to negotiate carbon club agreements that reward trade partners implementing comparable climate policies.

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7. Next Steps for Implementation#

The most recent version of the CCA (S.3523) was introduced in the U.S. Senate on December 17, 2025, by Senator Sheldon Whitehouse and referred to the Senate Finance Committee. A companion bill was introduced in the House by Representative Suzan DelBene. As of mid-2026, the bill has not yet advanced through committee:

• Covered domestic manufacturers must begin reporting emissions and production data to the Treasury by June 30, 2026
• If passed, the domestic carbon intensity fee and import tariff would take effect in 2027, with the carbon intensity baseline initially set at each industry's U.S. average
• The baseline will decline by 2.5 percentage points per year from 2027 through 2030, then by 5 percentage points per year starting in 2031, reaching zero in 2048
• The carbon intensity charge starts at $60 per metric ton of CO₂e and increases by 6 percent above inflation annually
• The President is authorized to negotiate international carbon club agreements with trade partners implementing comparable domestic climate policies, which could lead to import tariff exemptions for club members

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8. Final Takeaways#

The Clean Competition Act is a pragmatic, market-aligned policy that solves one of the biggest gaps in U.S. climate action: ensuring that emission cuts are real, not just shifted to other countries. By linking trade rules to climate action, it protects U.S. industrial competitiveness, drives global decarbonization, and reinvests all revenue back into industrial decarbonization domestically and abroad, rather than imposing unnecessary costs on consumers. As more countries adopt similar policies, the CCA is positioned to be a core building block of a global, fair decarbonization framework.

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References#

1. U.S. Congress, S.3523: Clean Competition Act, 119th Congress (2025-2026), Congress.gov, https://www.congress.gov/bill/119th-congress/senate-bill/3523
2. Resources for the Future, Projected Effects of the Clean Competition Act of 2025, December 2025, https://www.rff.org/publications/reports/projected-effects-of-the-clean-competition-act-of-2025/
3. Kyle Meng, "Can the 2025 Clean Competition Act Cut Global Emissions and Maintain U.S. Competitiveness?" Center for Strategic and International Studies, January 2026, https://www.csis.org/analysis/can-2025-clean-competition-act-cut-global-emissions-and-maintain-us-competitiveness
4. Climate Leadership Council, "The Clean Competition Act's Revenue and Policy Implications," March 2026, https://clcouncil.org/blog/cca-revenue/
5. European Commission, Carbon Border Adjustment Mechanism, https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en