OUTLOOK ’09: US heading for major environmental shift

29 December 2008 17:45  [Source: ICIS news]

US heading for environmental shiftBy Joe Kamalick

WASHINGTON (ICIS news)--The US is poised to undergo the greatest shift in national environmental policy and enforcement in its history, an abrupt change of course that could have profound impact on chemical producers and manufacturing in general.

The election of Barack Obama as president, his choice of environmental advocates for key administration roles, and a stronger Democrat majority in the next Congress means that broad federal mandates against the perceived threats of global warming are virtually guaranteed.

President-elect Obama and top leaders among congressional Democrats all favour an aggressive climate control policy that calls for forced reductions in US emissions of greenhouse gases (GHG) to 80% below 1990 levels by 2050.

To achieve that goal, legislation already introduced in Congress would impose a cap-and-trade emissions programme on US industry, power generation and the transportation sector.

The plan would put an immediate cap on the amount of GHG allowed for manufacturers, power plants and others with a schedule to reduce such emissions year-by-year to the 2050 goal. 

Federal authorities would auction emissions permits, which companies could then buy and sell - the trade part of cap-and-trade - as needed to cover a particular facility’s excess emissions.  If a firm's plant operates below its emission allowances, the company could sell its uneeded credits to earn extra revenue.

In theory, a cap-and-trade programme will force manufacturers and power companies to make their operations more green while at the same time raise billions of dollars in federal revenues.  Those revenues in theory would be used to offset expected energy cost increases for the poor and for investments in alternative energy technologies.

However, a recent study by the investigative arm of the US Congress found that the cap-and-trade system put in force in the EU three years ago has succeeded only in raising energy costs for businesses and consumers - without any impact on emissions.

The congressional report also indicated the EU cap-and-trade programme had failed to stimulate private sector investments in alternative or renewable energy technologies and instead may have encouraged manufacturers to move offshore.

US chemical industry representatives and leaders of the broader manufacturing and commercial sectors frequently have warned members of Congress and the incoming Obama administration against taking unilateral steps to impose climate control mandates on the nation.

Top officials at the US Chamber of Commerce were quick to caution Obama that climate control legislation he and his Democrat allies in Congress favour could cause severe damage to US chemical, steel and other major economic sectors already stressed by energy and feedstock costs.

Chamber president Thomas Donohue said he spoke with Obama and members of his staff shortly after the 4 November US elections about the need “to pursue a national policy on energy security”.

“We have already spoken at length with Senator Obama and members of his staff about the pressing need to expand US domestic energy supply and access to those supplies along with pursuing alternative energy sources, conservation and energy efficiencies,” Donohue said.

Among other effects, a federal cap-and-trade mandate would likely force a wide-scale shift by US electric utilities from coal as a power fuel to cleaner-burning natural gas.

However, congressional Democrat leaders remain opposed to oil and gas development along the US Atlantic and Pacific coasts, which until 30 September had been under a 27-year-old congressional drilling moratorium.

“We all learned in Economics 101 that if you have short supply and increasing demand, you’re going to get higher prices,” Donohue said.

He said that pursuing a climate control bill without first addressing a comprehensive national energy policy would undermine the economy.

“No one wants to see us go so far on one aspect of this, climate control, so as to make other objectives impossible to achieve,” he said.

Bruce Josten, the chamber’s executive vice president for government affairs, noted that during his campaign, Obama voiced support for the end of the congressional ban on offshore drilling, and that it is reasonable to expect that as president Obama will support access to offshore energy reserves.

“You can only approach those two issues [climate and energy] in a rational way to do so without causing harm to the economy,” Josten said.

“We can’t do anything that will cause further harm to some of our key industries, such as chemicals and steel, that are already strained by energy costs,” he added.

The US chemicals industry relies heavily on natural gas as a feedstock and energy source, and much of the rest of the country’s manufacturing sector also is gas dependent.

Climate control regulation may emerge as well from the Environmental Protection Agency (EPA), which under the incoming Obama administration is more likely to move to regulate carbon dioxide (CO2) emissions in every aspect of US industry and commerce.

In addition to seemingly certain legislation to impose climate control mandates, the new 111th Congress also is likely to replace the longstanding US programme for controlling chemicals in commerce, the Toxic Substances Control Act (TSCA).

Many in Congress want TSCA to be recast in the image of the EU’s programme for registration, evaluation and authorization of chemicals (REACH). TSCA is a risk-based approach to chemicals control while REACH is based on the precautionary principle.

US chemical industry officials have been blunt in their assessment that REACH will in time kill off Europe’s chemicals industry, and they are certain to oppose a similar shift in the US - although with what success remains to be seen.

New environmental regulation also will be manifest in 2009 when Congress revises existing law governing anti-terrorism security measures at major US chemical plants. 

Democrats in both the Senate and House want federal authority to impose inherently safer technology (IST) as a security measure at chemical plants judged to be at high risk for possible terrorist attacks.

Under draft legisilation, IST authority in federal hands would give enforcement officials the ability to force changes in feedstocks, inventory volumes, processes and product decisions at high-risk facilities.

To discuss issues facing the chemical industry go to ICIS connect

By: Joe Kamalick
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