US climate bill disarms economy - manufacturers

13 March 2008 17:19  [Source: ICIS news]

WASHINGTON (ICIS news)--A congressional mandate to reduce US greenhouse gas emissions with a cap and trade plan would amount to unilateral economic disarmament, eliminate some 2m jobs and cut growth by 8%, manufacturers warned on Thursday.

 

The National Association of Manufacturers (NAM) said its study found that the business and economic impacts of a cap and trade proposal now before Congress not only would wreak havoc in the US economy, the measure would do little or nothing to affect global environment.

 

John Engler, NAM president and former governor of Michigan, told a press conference that a cap and trade emissions mandate “will be a lose-lose proposition for both the US economy and the environment”.

 

He warned that if Congress imposes a cap and trade emissions control measure on the country, “we will be committing what I call economic disarmament because we will drive US jobs offshore and at the same time trade relatively clean production in this country for dirtier production offshore, so you end up with job losses and a worse environment”.

 

Under Senate bill S-2191 now pending before Congress, known as the “America’s Climate Security Act,” emissions of carbon dioxide (CO2) and five other greenhouse gases (GHG) would be capped and then reduced to reach a level 63% below the nation’s 2005 emissions total by 2050.

 

The bill would apply only to four main economic or energy sectors: manufacturing, transportation, electric power generation and natural gas processing.

 

Also known as the Lieberman-Warner cap and trade bill - named for its sponsors, Senator Joe Lieberman (Independent-Connecticut) and Senator John Warner (Republican-Virginia) - the measure would auction GHG emissions allowance permits to individual companies in those four sectors.

 

Those companies whose plants emit less greenhouse gases than their purchased permits allow could trade their excess emission credits to firms whose facilities exceed allotted maximums.  In theory the system would create an economic incentive for manufacturers and power companies to make their production operations more green.

 

Instead, Engler argued, the costs imposed by cap and trade will force US production capacity to foreign shores, undermining the nation’s economy and workforce.

 

He said the study done for NAM by Science Applications International Corporation (SAIC) used US Energy Department data to model the impact of S-2191, finding that US gross domestic production would fall by 8.5% and some 1.8m jobs would be lost by 2030.

 

Of particular concern to the country’s manufacturing sector, and especially for chemicals production, Engler said S-2191 would drive natural gas prices to about $26/m Btu by 2030 as power companies increasingly turned from coal to natgas to reduce their emissions profiles. 

 

Spot prices for US natgas are now around $10/m Btu compared with prices as low as $2/m Btu as recently as 1999. US chemicals manufacturers are heavily dependent on gas as a feedstock and energy source.

 

The Senate is expected to take up consideration of the Lieberman-Warner bill in the second quarter. As currently drafted, the bill faces a difficult course in Congress and would almost certainly be vetoed by President George Bush.

By: Joe Kamalick
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