US chemicals, other producers warn of climate bill costs

08 June 2009 23:25  [Source: ICIS news]

WASHINGTON (ICIS news)--US chemical makers, refiners and other high energy consuming manufacturers warned on Monday that climate legislation advancing in the US House will cause dramatic increases in fuel and other energy costs.

The American Materials Manufacturing Alliance (AMMA) said in a letter to members of Congress that under the energy and climate control legislation, “all forms of energy could suffer a dramatic increase in cost as a result of climate policy”.

The alliance includes the American Chemistry Council (ACC), the American Iron and Steel Institute, the Aluminum Association and the American Forest and Paper Association.

The bill, HR-2454, titled The American Clean Energy and Security Act (ACES Act) of 2009, would cap US industrial and transportation emissions of carbon dioxide (CO2) and other greenhouse gases (GHG) and mandate annual reductions to 83% below 2005 levels by 2050. 

The bill also provides for the auction or distribution of emissions permits that industrial facilities could purchase and trade to cover excess amounts of GHG production they generate beyond the level of a baseline year assigned to each industrial sector.

The alliance cautioned that in addition to the direct increases in electric energy costs that the climate bill will generate - as utilities are forced to switch from carbon-rich coal to more costly fuels - there will be further costs that inevitably will burden end consumers of all types of energy.

“Much of the future increased cost of energy will come from the cost of capital equipment related to fuel switching, deployment of waste gas capture and regeneration technology, deployment of carbon capture and sequestration technology and deployment of wind, solar and other clean energy technologies,” the alliance said.

The American Petroleum Institute (API) also warned that the climate control legislation “will be massively costly” throughout the US economy.

The emissions limits and the anticipated cost of emissions permits “will drive up costs of producing and refining gasoline, diesel and other fuel products while doing nothing to protect fuel consumers”, said institute president Jack Gerard.

He said the emissions control mandate in the bill will have harsh cost impacts on families, the trucking industry, airlines, the construction sector and other business interests that rely on oil to make or transport products.

Citing an analysis of emission permits costs in a study by the Congressional Budget Office (CBO), Gerard said the legislation is expected to add as much as 77 cents to the price of a gallon of gasoline, which is now around $2.50/gal (€0.48/litre) in much of the country.

A House subcommittee is to hear testimony on Tuesday about the emissions permits and their distribution or sale to various sectors of US industry. Still other House and Senate committees are to hold hearings on the huge - 900 pages - and controversial energy and climate bill in weeks ahead.

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