US business gears up to fight Obama cap-and-trade

20 March 2009 21:50  [Source: ICIS news]

US business presses Congress to abandon costly climate billWASHINGTON (ICIS news)--US business leaders said on Friday they are launching a massive grassroots effort to block President Barack Obama’s plan to impose a cap-and-trade climate control mandate in the federal budget.

The US Chamber of Commerce said that early on Friday it sent an e-mail alert out to its 3m member companies and thousands of local business and commercial groups urging them to contact their senators and representatives in Congress to voice opposition to Obama’s $3,600bn (€2,628bn) budget proposal.

Bill Miller, the chamber’s senior vice president for political affairs, said that by Friday afternoon about 5,000 individuals had contacted Congress, raising objections to one or another aspect of the budget proposal.

Bruce Josten, chamber senior vice president for government affairs, told a press conference that “momentum is building on Capitol Hill for removing cap-and-trade from the budget proposal, even among some Democrats”.

The Obama climate change measure - contained in his fiscal year 2010 budget proposal - would put an immediate limit or cap on greenhouse gas (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 climate change plan aims to cut US GHG emissions to 14% below 2005 levels by 2020 and then to 83% below 2005 levels by 2050.

In proposing the cap-and-trade mandate, the White House said the sale of emissions permits would likely raise $646bn during its first eight years of implementation.

However, Josten quoted White House advisor Jason Furman as saying that the cost of the cap-and-trade programme would probably be two or three times the initial estimate or as much as $1,900bn over eight years.

“Imposing a tax of close to $2,000bn very simply does not belong in the budget document,” Josten said.

He said that opposition to cap-and-trade is growing among members of Congress of both parties, especially among those who represent coal-mining states and those states that rely heavily on coal-fired power plants for their electricity supplies.

Coal-fired power plants provide about 50% of the US electricity supply.

A cap-and-trade system would impose particularly high costs on coal-fired facilities because of their higher rates of emissions of carbon dioxide (CO2) and other greenhouse gases (GHG). Even cap-and-trade advocates concede that those costs in turn would be passed on to consumers and businesses in the form of sharply increased energy prices.

“These representatives and senators recognise that there would be major rate increases on their constituents, and they are wary of seeing commercial and industrial interests leave their states because of those costs,” Josten said.

He said that as higher energy costs drive business and industry out of coal-dependent states, local governments’ tax bases would erode and people would leave the state.

“As more members of Congress look at these results, they see it is not good, not good, not good,” Josten said.

Josten and other chamber officials also attacked the Obama budget’s heavy increase in taxes on corporations and small businesses.

“The tax increases are breathtaking,” Josten said.  He said the budget proposal would impose $353bn in new taxes on corporations and some $955bn in new taxes on high-income individuals, noting that many entrepreneurs and small business operators are taxed as individuals and would be hard hit by the planned tax hikes.

Many US chemical companies and a range of other manufacturers have voiced opposition to the cap-and-trade emissions reduction plan, arguing that it would accelerate the movement of US industry offshore to low-cost energy countries.

($1 = €0.73)

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