The Clean Competition Act creates a new tax system designed to encourage cleaner manufacturing and level the playing field between domestic and foreign producers. Starting in 2026, the law will charge a fee on certain industrial products based on how much carbon pollution was created during their production. The fee applies to both goods made in the United States and products imported from other countries.

Here's how it works: The government will track the carbon emissions from factories that produce key industrial goods like steel, cement, and chemicals. Each industry gets a baseline carbon intensity score—essentially a measure of how much pollution is typical for that type of product. If a factory or imported good exceeds that baseline, it gets charged a fee. The fee starts at $60 per metric ton of excess emissions in 2026 and increases each year. However, the baseline gets stricter over time, meaning factories have to continuously reduce their emissions to avoid higher charges. By 2048, there's no baseline adjustment anymore, so all excess emissions get charged at the full rate.

The law includes several important features: Domestic manufacturers can get refunds on these charges when they export their products, so they're not penalized for selling abroad. Companies can reduce their charges by capturing carbon directly from the air and storing it permanently. For imported goods, the law tries to determine the actual carbon emissions from foreign factories, but if that information isn't available, it uses a formula based on the country's overall economy. The law also creates a "carbon club" where countries can join together and agree to similar carbon pricing systems, potentially getting better treatment in how their goods are evaluated.

The goal is to make low-carbon products more competitive while pushing all manufacturers—domestic and foreign—to reduce their emissions. It's designed to work alongside other countries' climate policies rather than against them, and it includes protections for the world's poorest countries by exempting their goods from these charges.