Using Trump’s trade war to address climate change

President Trump’s tariffs are generally acknowledged to be terrible economic policy. And they’re acknowledged to be even worse immigration policy. Nobel economist and trade expert Paul Krugman sums up Trump’s trade war quite simply: “it will reduce the living standards of most Americans, destroy many jobs in U.S. manufacturing, and hurt farmers.”

As much as they disagree with the trade wars, Congress has shown little appetite for taking meaningful action to stop the tariffs from taking effect. If Congress refuses to challenge the tariffs head on, they should at least ensure that the revenue is reinvested in ways that benefit our economy.

What if there was a way to increase the competitiveness of American steelmakers while at the same time address greenhouse gas pollution from the industrial sector? Thanks to President Trump’s recent trade war, there may be an answer.

President Trump is right that we’re collecting “MANY billions of dollars” in tariff revenue — in fact, as of March 28 the U.S. has collected around $6.2 billion in revenue from the Section 232 tariffs that were put in place on steel and aluminum imports in January last year. According to the Congressional Research Service, annual revenue from the 232 steel and aluminum tariffs could be as high as $7.5 billion. 

Currently, that tariff revenue goes into the general fund of the U.S. Treasury. Why not reinvest that revenue directly back into the domestic steel industry through R&D funding?

Industrial emissions are seen as one of the most challenging areas to address due to the sector’s energy-intensity and lack of technological alternatives. Steel is no exception; steelmaking is an incredibly carbon-intensive process which uses coke (coal) or methane (natural gas) as a reduction agent to transform iron ore to iron, which is then converted into steel. This reduction process represents around 85 to 90 percent of the total carbon dioxide pollution associated with making steel.

Although it’s relatively new, the Hydrogen Breakthrough Ironmaking Technology (HYBRIT) process has the potential to create near-zero greenhouse gas polluting steel by replacing coal with hydrogen as the reduction agent.

The result? “Green” steel. 

Three Swedish companies are currently working to commercialize this technology with support from the Swedish government. The partners plan to invest nearly $150 million in a pilot phase to test the HYBRIT process. Using even just a quarter of the roughly $6.2 billion in revenue already collected from steel and aluminum tariffs could make the U.S. a global leader in this new technology.

If properly commercialized, “green” steel stands to position the U.S. steel industry at the forefront for climate-conscious customers who are willing to pay a premium for a near-zero emission product. In the long-term as technology costs have declined, reducing the carbon profile of American-made steel increases our competitiveness abroad. This could be especially true in developing countries looking to grow their economies without suffering the effects of harmful greenhouse gas pollution. 

Funding for R&D is a generally well-supported bipartisan tradition. If the Trump administration truly believes that tariffs are an effective economic tool, let’s at least consider using Trump’s trade war to build a more sustainable, climate-friendly future for the American steel industry.

Carl Greenfield is a fellow with the Clean Energy Leadership Institute and a director at International Technology and Trade Associates.