US chems warn against climate control costs

17 March 2009 22:33  [Source: ICIS news]

WASHINGTON (ICIS news)--President Barack Obama’s proposed climate change mandate would put a $110bn (€85bn) cost burden on the industry and drive domestic production offshore, US chemical makers warned on Tuesday.

The American Chemistry Council (ACC) said in a letter to the House Energy and Commerce Committee that the president’s plan for a cap-and-trade emissions reduction mandate would cost the country’s chemical producers some $5.6bn in compliance costs and $2.1bn in higher energy and feedstock costs in the plan’s first year.

In the Obama administration’s budget proposal for fiscal year 2010, a mandatory emissions reduction plan aims to cut US greenhouse gas (GHG) production to 14% below 2005 levels by 2020 and then to 83% below 2005 levels by 2050.

The cap-and-trade plan would put an immediate limit or cap on GHG production and auction emissions permits to the broad industrial sector. Those firms whose facilities emit fewer emissions than permitted could sell their excess credits to companies whose operations exceed allowed limits - the trade part of cap-and-trade.

ACC president Cal Dooley warned that the administration’s estimates of the dollar value of those carbon credits are unrealistically low and that actual costs would be much higher, imposing unsustainable financial burdens.

Dooley said the council’s analysis puts costs to the chemicals sector at some $110bn over the eight-year life of the Obama administration’s climate control plan.

“That is equal to a nearly 50% increase in the industry’s current tax liabilities,” Dooley said. Such a financial burden, he said, “would wipe out margins in our more energy-intensive processes”.

“Those additional costs will certainly price many of our more energy-intensive manufacturing processes out of the US market,” he said.

“We’ve seen it happen before, when spiralling natural gas prices in the early part of the decade forced a majority of US ammonia and methanol plants to close,” he added.

Dooley argued that if Congress does implement a cap-and-trade climate bill, emissions credits should be distributed free to industry in order to avoid loss of US industrial productive capacity and jobs.

However, the Obama budget proposal and its backers in Congress want to auction emissions permits to industry in order to raise revenues to support alternative energy development and to offset higher energy costs that a cap-and-trade programme would impose on lower income consumers.

Congressional consideration of the Obama cap-and-trade proposal, along with other aspects of the budget, is expected to consume much of the time remaining before the beginning of the 2010 fiscal year on 1 October this year.

($1 = €0.77)

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By: Joe Kamalick
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