Key Takeaways
FY2026 appropriations bill directs the National Energy Technology Laboratory to compare U.S. vs. foreign emissions intensity for goods targeted by the EU’s Carbon Border Adjustment Mechanism (CBAM).
The study revives core elements of the stalled PROVE IT Act, previously opposed by free market and conservative organizations as groundwork for U.S. carbon tariffs or a domestic carbon tax.
Despite claims of defending U.S. exporters, the data could justify import tariffs, raise costs for American manufacturers and consumers, and lead to domestic carbon pricing, clashing with Trump administration’s priorities on energy.
NBER research shows carbon-restricting policies sharply cut consumption and income for the poorest, acting as an economy-wide regressive tax on essentials.
The admin already opposes carbon taxes and can counter EU CBAM without this study, which risks opening the door to harmful policies.
On February 2, the Institute for Energy Research joined a coalition of 37 organizations to send a letter to U.S. Department of Energy Secretary Chris Wright, alerting him to report language inserted into the Fiscal Year 2026 Energy and Water Development Appropriations Bill. This report language requires the National Energy Technology Laboratory (NETL) to conduct a study comparing the emissions intensity (greenhouse gas emissions per unit of production) of specific U.S.-produced goods with that of goods produced in other countries. The goods targeted align closely with those covered by the European Union’s Carbon Border Adjustment Mechanism (CBAM), which imposes fees on high-emission imports.
Although presented as a neutral data-collection effort, this study revives core elements of the PROVE IT Act (Providing Reliable, Objective, Verifiable Emissions Intensity and Transparency Act). That bill was originally introduced in the 118th Congress by Senators Kevin Cramer (R-ND) and Chris Coons (D-DE). It failed to advance due to insufficient support, particularly from conservatives concerned about its implications, since it would be the foundational work for implementing U.S. carbon tariffs and a domestic carbon tax. But don’t take our word for it. IN 2024, during consideration of the PROVE IT Act in committee, Senators in support of the bill rejected amendments that would have created a budget point of order against using the data collected by the PROVE IT Act to justify a domestic carbon tax.
What an Emissions Intensity Study Will Do
Advocates for the PROVE IT Act and the related NETL study have adjusted their stated objectives over time. Initially, the PROVE IT Act aimed to hold other nations accountable for higher emissions by highlighting the U.S.’s cleaner production standards. More recently, the stated focus has shifted toward generating product-level data on carbon intensity to counter policies such as the EU’s Carbon Border Adjustment Mechanism (CBAM) and to protect American exporters from perceived discriminatory tariffs.
No matter the publicly stated intent by proponents in gathering such detailed emissions data, the result would be to establish a foundation for imposing tariffs on higher-carbon imports from other countries. This development should raise concerns—even among strong supporters of protective trade measures—because U.S. manufacturing relied on imported intermediate goods and services for approximately 18.7% of its needs. Such import tariffs would raise costs for American businesses that depend on these inputs, costs that would certainly be passed along to U.S. consumers in the form of higher prices for common goods. Furthermore, to comply with WTO rules and avoid accusations of unfair trade practices, these measures could ultimately push the United States toward implementing domestic carbon pricing or taxes on its own industries.
NBER research on the EU Emissions Trading System (the world’s largest carbon market) shows that restrictive carbon policy shocks don’t just contract economic activity, they slash consumption and income far more sharply for the poorest households. The NBER found that carbon-restricting policies that raise energy prices by 1% trigger cumulative drops in non-durable expenditures (excluding energy) of about 3.5% for the bottom 25% income group over a three-year horizon, compared to just 0.9% for the top 25%. Moreover, income for the least well-off falls even more sharply, by nearly 5% for low-income households versus about 3% for high-income households. These disparities arise not only from direct increases in energy costs but also from reduced demand, leading to layoffs and wage cuts in sectors like retail and hospitality, where low-income workers are disproportionately employed. Given that over 80% of global energy still comes from conventional energy sources like oil, natural gas, and coal, and that countless products rely on these as inputs, this would constitute an economy-wide regressive tax. It would disproportionately burden lower-income families, workers, the elderly, and those on fixed incomes by driving up costs for heating, transportation, groceries, housing, and other essentials.
We Don’t Need A Study to Push Back Against the EU
Pursuing a study that opens the door to such policies is incompatible with the Trump administration’s core energy priorities: increased domestic production, ensuring affordability, and enhancing energy security. The administration has demonstrated a clear opposition to carbon tax schemes at both domestic and international levels. For example, the Trump administration has firmly resisted UN-backed global carbon taxes, particularly one proposed through the International Maritime Organization (IMO) targeting international shipping emissions. In 2025, the IMO advanced its Net-Zero Framework (NZF), which included a greenhouse gas pricing mechanism, effectively the UN’s first global carbon tax on shipping, to fund transitions to lower-emission fuels. This would have raised costs for a sector responsible for only about 3% of global emissions, but for 90% of world trade.
In response, key administration officials, including Secretary of State Marco Rubio, Secretary of Energy Chris Wright, and Secretary of Transportation Sean Duffy, issued joint statements in 2025 accurately describing the IMO proposal as a “neocolonial export of global climate regulations.” Those statements, along with additional diplomatic pressure from the administration against the UN, helped delay the implementation of the tax. The IMO voted 57-29 to postpone the regulation’s implementation by one year (with a potential rescheduled vote in October 2026).
The administration’s response to the IMO proposal is relevant because the ostensible reason for pursuing the NETL study is to obtain data to counter the EU’s carbon tariff program, which will punish American export products. Given recent events, it’s clear that President Trump and his administration will not stand by and tolerate the EU imposing penalties on American products through a carbon tariff program. Therefore, it does not make sense to pursue a study that would invite a cascading set of harmful policy interventions when other effective policy options are on the table.
Conclusion
The insertion of this report language into the Fiscal Year 2026 Energy and Water Development Appropriations Bill represents a subtle but significant attempt to revive elements of the failed PROVE IT Act through a non-binding directive. While proponents may frame the NETL study as a defensive tool to highlight America’s relatively lower emissions intensity and counter discriminatory EU tariffs under the CBAM, the practical effect is to generate the precise data infrastructure needed to justify future energy taxes.
Such policies directly conflict with the Trump administration’s unambiguous record of rejecting carbon taxes and related schemes, both at home and through international bodies such as the IMO. The successful 2025 pushback against the UN’s proposed global shipping carbon tax demonstrates that the administration prioritizes the American economy over accommodating foreign frameworks that penalize U.S. producers and consumers. Secretary Wright and the Department of Energy should therefore approach this study directive with extreme caution, recognizing it as a potential gateway to regressive, economy-wide burdens that disproportionately harm working families, manufacturing sectors, and energy security.
