INSIGHT: Great expectations underlie climate bills

15 October 2009 17:09  [Source: ICIS news]

By Joe Kamalick

Blue sky forecasts for climate bills clouded with uncertaintyWASHINGTON (ICIS news)--Congressional plans to enact sweeping climate change legislation are predicated in part on great expectations for major breakthroughs in energy technology and an explosion of non-carbon resources - but it all may come to naught.

The US Senate this week held hearings on pending climate change legislation, trying to gauge the economic costs of the central element of both the House and Senate bills - a cap-and-trade mandate that would limit and then sharply reduce US emissions of greenhouse gases (GHG).

The bottom line, according to a variety of experts who testified, is that cap-and-trade will without question raise costs for US industry, households and the economy in general.

But exactly what those costs will be, no one can say with any certainty. 

In its cost analysis of HR-2454, the American Clean Energy and Security (ACES) Act, passed by the US House in June, the Congressional Budget Office (CBO) said that US gross domestic product (GDP) would be reduced by as much as 3.5% by 2050.

In addition, an unknown number of jobs would be lost as the nation worked to shift from carbon-based energy to non-carbon or low-carbon resources such as wind, solar, biomass and nuclear power.

As Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (Democrat-New Mexico) indicated at the outset of this week’s hearing, climate change legislation costs are said by global warming advocates to be inconsequential - or catastrophic according to opponents.

But even the optimistic estimates of economic costs may be well off the mark if hoped-for technologies and non-carbon energy roll-outs never materialise.

Both the House and Senate climate bills make some brave assumptions, including broad commercial production of cellulosic ethanol, successful development of carbon capture and sequestration (CCS) - to enable continued coal-fired power generation - and a breathtaking spread of nuclear power.

But all of that is in doubt and may never come to pass. 

Moving ahead with climate change legislation on the expectation of energy technology breakthroughs is like driving across a 500-mile stretch of desert with the “expectation” that you’ll find a gasoline station and water somewhere along the way. It could end very badly.

In its testimony, the Congressional Research Service (CRS) noted that “a considerable amount of low-carbon [power] generation will have to be built under HR-2454” to meet the bill’s emissions reductions targets.

The CRS, the research arm of Congress, emphasised that “technological development will be critical” in meeting the legislation’s emissions cuts without causing significant economic harm.

The Environmental Protection Agency (EPA) also testified that its analysis of factors affecting the costs of meeting HR-2454’s emissions targets “are inherently uncertain, such as ... the potential for technological advances”, citing carbon capture and sequestration in particular.

“There is much uncertainty about the rate at which various technologies will penetrate,” the agency said.

An official representing the Energy Information Administration (EIA), the statistical and analysis division of the Energy Department, said that the extent to which technical breakthroughs could mitigate increased energy costs also is uncertain.

“It is well-known that some key technologies for reducing emissions face a variety of technical challenges,” he said. Once again, the uncertain potential for carbon capture and sequestration was the focus.

And, in some cases, he said, there are “additional questions regarding public acceptance of their widespread deployment arising from concerns unrelated to global climate change”, such as public opposition to the sitting of nuclear power plants or wind farms.

So what happens if carbon capture and sequestration proves unworkable, and if expectations for US construction of another 20, 40 or 60 new nuclear power plants are blocked by public opposition?

Coal-fired power plants - which provide half of the nation’s electricity - would quickly become cost-prohibitive as carbon emissions became increasingly limited, and without offsetting additions in nuclear power, the cost of natural gas would climb far higher than production.

Climate change advocates argue that the US could and would impose a carbon tax on foreign-made goods, thus insulating domestic manufacturers from foreign producers unburdened by carbon restrictions. But that too holds a far greater measure of hope than certainty.

Senator Lisa Murkowski of Alaska, the ranking Republican on the committee, noted that “economic assessments of climate change bills vary greatly”.

However, she said, “every analysis projects two things in common: higher energy prices and lower economic growth”.

That much is certain.

To discuss issues facing the chemical industry go to ICIS connect
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index

Related Articles