INSIGHT: US climate bill so huge it will fall

05 June 2008 17:01  [Source: ICIS news]

By Joe Kamalick

 

WASHINGTON (ICIS news)--If eventually passed by Congress, the climate control bill being debated in the US Senate would bring about the biggest expansion of federal power and the largest tax increase ever - but nothing remotely like it will ever become law.

 

The bill, S-3036, the America’s Climate Security Act, is massive and would extend federal control to virtually every aspect of business, commerce and consumer life. 

 

It is so far-reaching and loaded with so many uncertain consequences that it virtually ensures that every member of Congress will find something in it he or she cannot tolerate.

 

It is so big that no one, not even its proponents, has even a faint idea what its exact impact will be on the US economy - except that the impact will be huge and costly.

 

William Kovacs, US Chamber of Commerce vice president for environment and technology, said the bill is so large and would create such a monstrous bureaucracy that the measure cannot help but collapse under its own weight. (The chamber has created an organizational flow chart based on S-3036, which can be viewed on the organization’s Web site.)

 

But that is not to say that the chamber and a broad spectrum of US manufacturers, transportation, refining and electric utility sectors take any comfort in the certain knowledge that the bill will never pass in this Congress.

 

They remain concerned because the very approach being taken by congressional backers of this climate change bill suggests to industry that policymakers on Capitol Hill don’t have a clue about how the US market system works and what havoc the proposed cap-and-trade emissions control bill would wreak upon the country’s economy and citizenry.

 

“We have been going up to Capitol Hill for years,” Kovacs told a press conference in Washington this week, “trying to explain to members how things work and that there are efficient, technology-based ways of treating climate change.”

 

If this legislation were to become law, said Kovacs, “US commerce and even federal regulations would grind to a halt, and it would even set back the effort to deal with climate change for decades”.

 

Simply put, if approved, S-3036 would impose a mandatory limit or cap on emissions of carbon dioxide (CO2) and other greenhouse gases (GHG) by chemical producers and other manufacturers, electric utilities, the transportation sector and natural gas production and consumption.

 

Those emission caps would be gradually reduced annually until, in theory, by 2050 US emissions would be about 75% below the nation’s 2005 emissions level.

 

In addition to emissions caps, the bill would raise as much as $7,000bn (€4,480bn) in federal tax revenue from emissions permits that would be sold to US manufacturers, refiners and utilities to cover emissions that exceed allowed limits.

 

The stated objective is to reduce US emissions of greenhouse gases - and to get China and India and all other developing nations to enact similar measures - so as to halt and perhaps reverse global warming.

 

“The problem is,” said Kovacs, “that on the Hill their focus is just to cap and reduce US emissions of greenhouse gases. Well, it’s relatively easy to do that - just stop using energy.”

 

“But if you are going to cap and cut emissions and thereby cap energy, you need to replace that energy with alternative energy sources that are emission-free, and this bill is not dealing with that,” he said.

 

If it became law, S-3036 would essentially mean the US would have to shut down all of its coal-fuelled power plants, which now account for half of US power consumption.

 

In order to make up that energy loss - especially if the nation wants to enjoy continued population and economic growth - the chamber says that the US would have to

• build 1m 5 megaWatt (mW) wind turbines (compared with the 28,000 that exist worldwide today); and
• grow biofuel crops in an area the size of Alaska, California and Montana combined; and 
• build about 700 new 1 gigaWatt (gW) nuclear power plants; and 
• build some 1,400 zero-emission 500 mW power plants using carbon capture and sequestration technology that at present is just a distant dream.

Those energy capacities and technologies may well be available in 30-40 years, Kovacs said, but in the meantime an arbitrary and mandatory shutdown of existing fossil fuel energy sources would simply collapse the nation’s economy.

 

For their part, US chemical producers and other manufacturers warned that the Senate climate control legislation would sharply raise energy costs, force more US production offshore and cut 4m jobs.

 

The American Chemistry Council (ACC) and the National Association of Manufacturers (NAM) were among many US industrial and commercial organizations to raise an alarm as the Senate began debating the bill this week.

 

The Natural Gas Council (NGC) charged that if approved the legislation would put the US on an energy collision course by dramatically increasing demand and prices for natgas while limiting and even reducing the country’s ability to develop domestic gas reserves.

 

ACC senior vice president Thomas Gibson warned that under the Senate bill “significant supplies of natural gas will be diverted into the utility sector at a significant cost and disadvantage to American manufacturing”.

 

US chemical producers are heavily dependent on natural gas as a feedstock, and manufacturing in general uses gas as a power source.

 

Gibson noted that the bill makes no provision for increasing domestic US natgas production. “As a result, natural gas prices will climb to a level that will force many energy-intensive manufacturers to shut down their plants and relocate overseas, continuing an already apparent trend of job losses in our industry,” he said.

 

NAM executive vice president Jay Timmons also cautioned that the bill would increase natgas demand, prices and industrial job losses.

 

“If adopted, the legislation by 2030 could lead to net national employment losses of up to 4m jobs, electricity price increases of up to 129%, gasoline price increase of up to 145% and a loss of household income of up to $6,752 per year,” Timmons said.

 

An earlier study said that the climate control bill would reduce US natural gas production by as much as 40% by imposing emission costs on exploration and development operations that would make many marginal gas fields too costly to produce.

 

The Senate is expected to debate S-3036 through this week.  A similar bill is pending in the US House of Representatives, but neither measure is expected to pass this year.  Another effort to pass climate control legislation is expected after a new administration is sworn in next year.

 

($1 = €.64)

 

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By: Joe Kamalick
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