US chemicals, other manufacturers slam climate bill

18 March 2009 17:53  [Source: ICIS news]

WASHINGTON (ICIS news)--US chemical makers and a broad range of other manufacturers on Wednesday warned Congress against climate control legislation, saying a cap-and-trade emissions mandate will drive investment and jobs offshore.

Paul Cicio, president of the Industrial Energy Consumers of America (IECA), told a House Energy and Commerce Committee panel that a mandatory cap-and-trade programme would unfairly target US manufacturers, and that a similar plan already in place in the EU has damaged European industry.

The some 40 member firms of IECA are manufacturers that consume large amounts of energy. About one-third of them are chemical producers, and the others include metals, paper, glass and equipment makers.

Cicio told the committee’s panel on energy and environment that “capping greenhouse gas (GHG) emissions of the industrial sector will drive investment and jobs offshore and increase imports”.

The committee hearing was part of general congressional consideration of climate control proposals by the administration of President Barack Obama.

The Obama plan - contained in his fiscal year 2010 budget proposal - would put an immediate limit or cap on GHG production and auction emissions permits to the broad industrial sector. 

Manufacturers 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.

The president's plan aims to cut US GHG emissions to 14% below 2005 levels by 2020 and then to 83% below 2005 levels by 2050.

Cicio argued, however, that a cap-and-trade mandate would unfairly penalise US industry.

“The US industrial sector is not the problem,” Cicio said, referring to GHG emissions.

“In the US, the industrial sector’s GHG emissions have risen only 2.6% above 1990 levels while emissions from the residential sector are up 29%, commercial up 39%, transportation up 27% and electricity generation up 29%,” Cicio said.

He argued that “under cap-and-trade, the industrial sector pays twice ... through the additional cost of carbon embedded in energy purchases and through the higher cost of natural gas and electricity”.

The US chemicals sector is heavily dependent on natural gas as a feedstock and energy fuel.

Cicio said that EU cap-and-trade programme, initiated in 2005 and known as the Emissions Trading Scheme (ETS), has not reduced greenhouse gases but has damaged Europe’s manufacturing base.

“There is an assumption that the EU ETS was a success, but that is not the case,” Cicio said.

“Carbon dioxide emissions in the US fell by 1.8% in 2006, compared with a 0.3% increase in emissions in the EU,” he said, citing data from the US Energy Information Administration, although both the US and EU experienced growth rates of around 3% that year.

He said that while the ETS is still ramping up to full implementation, “there is already evidence of serious economic and carbon leakage among European manufacturers”.  Leakage is the term used to describe the offshore movement of manufacturing, related jobs and emissions in response to carbon cap initiatives.

“This is evidenced by the serious debate underway in Europe that is aimed at preventing further erosion and protecting remaining manufacturing jobs and future capital investment,” he said.

Multiple committees in the US House and Senate are expected to weigh in on the Obama administration’s climate control legislation in months ahead. 

As part of the president’s budget, the measure would have to be approved by Congress before the 2010 fiscal year begins on 1 October this year, a goal many think is unattainable, especially with the US economy in recession and amid already high job losses.

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By: Joe Kamalick
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