Energy and Climate Issue Brief
ISSUE
The American Chemistry Council believes Congress must pass a comprehensive energy policy that includes efficiency and conservation, fuel diversity (including lower-emission energy sources such as alternatives and renewables), and expanded access to domestic oil and natural gas. We also believe Congress must construct climate policies that maintain the global competitiveness of energy-intensive U.S. manufacturers such as the chemical industry.
BACKGROUND
America’s chemical industry uses large amounts of energy—especially natural gas—to heat and power our facilities and as a raw material for chemistry that goes into thousands of products that make American lives better, healthier, and safer. We use energy to save energy, with our materials going into such energy-saving products as insulation, vinyl windows and siding, house wrap, wind turbine blades, solar panels, and lightweight vehicle parts. Use of these products helps reduce U.S. greenhouse gas emissions. The chemical industry is also closely tied to the rest of the U.S. economy: 96 percent of America’s manufactured products use our materials.
Given our industry’s reliance on energy, one of our most pressing challenges is its high and volatile U.S. cost. Because we use natural gas as a raw material or “feedstock” to make many of our products, its sharply rising price over the last decade is having a significant impact on our ability to maintain our domestic manufacturing and jobs and continue providing products Americans rely on for energy efficiency. In fact, the U.S. chemical industry spends about $85 billion a year on energy inputs.
Unlike oil, natural gas is priced regionally, not globally. Due to energy policies in many countries that lead to more available, affordable natural gas, natural gas in many other countries can cost a fraction of what it costs in the United States. U.S. chemical makers and other manufacturers simply cannot compete effectively in a global market with such high relative costs for a key input. As a result, more than 160,000 jobs in the business of chemistry have been lost in the United States since 2000. Consumers will ultimately feel the impact as well, through home heating bills and/or the cost of products made with natural gas.
The need for affordable energy is also closely linked to climate policy. Many climate policy proposals would create new demand for natural gas because natural gas is used for clean energies such as low-emission electricity, cleaner transportation fuels, renewable and alternative energy, and a feedstock for energy-saving products. Higher U.S. natural gas demand—in the absence of corresponding new supply—would further increase the cost of this vital raw material and help drive America’s energy-intensive industries and jobs out of U.S. markets. Meanwhile, global greenhouse gas emissions could increase as U.S. manufacturing production, jobs and emissions are transferred to more carbon-intensive nations, also known as “leakage.”
In 2008, the long-standing presidential and congressional moratoria on energy development in the Outer Continental Shelf (OCS) were lifted, taking the first step towards unlocking U.S. known energy reserves. However, if we are to move forward on a comprehensive plan, the energy in these reserves must be produced. Combined with policies that curb natural gas demand growth by making the nation more energy-efficient and help the U.S. produce electricity from diverse energy sources, Congress can help level the global manufacturing playing field by enacting policies that help bring down the price of natural gas.
AMERICAN CHEMISTRY VIEWPOINT
Energy Policy
ACC believes that Congress must pass a comprehensive, bipartisan national energy policy that improves our nation’s energy security and reduces greenhouse gas emissions. Access to a reliable, affordable supply of energy—especially natural gas—is vital to the business of chemistry, to the future of the American manufacturing base, and to the health of the U.S. economy as a whole.
Consequently, U.S. energy policy must significantly increase domestic energy supplies by exploring and producing both onshore and offshore, including areas in the eastern Gulf of Mexico, which are closest to existing infrastructure, and in the OCS. State revenue sharing, as is done in Texas, Louisiana, Alabama, and Mississippi, will provide an incentive for states to encourage exploration and production. A comprehensive energy policy must also promote and encourage energy efficiency and increase America’s fuel diversity by utilizing low-emission sources and technologies such as renewables and alternatives, nuclear, and combined-heat-and-power (CHP). In addition, developing technologies to safely capture and store CO2 emissions from coal-fired power plants—carbon capture and sequestration, or CCS—is vital to the nation’s energy security.
On June 17, 2009, the Senate Natural Resources Committee passed S. 1462, The American Clean Energy Leadership Act, which included an amendment by Senator Byron Dorgan (D-ND) that lifts some of the restrictions on domestic energy exploration in the eastern Gulf of Mexico, including natural gas-rich deposits south of the Florida Panhandle and close to existing infrastructure. ACC supports the inclusion of expanded domestic energy development in the Gulf of Mexico and hopes that there will be an opportunity to consider domestic energy opportunities in other offshore areas in the Atlantic and Pacific, as well as accelerate oil and gas lease sales for identified reserves, as the full Senate debates this bill.
Climate Policy
American chemistry is a climate solutions provider and we support policies to reduce greenhouse gas emissions across the economy. A recent lifecycle analysis conducted by McKinsey & Company and reviewed by the Öko Institut indicates that the use of chemistry products saves 2-3 units of CO2 for every unit of CO2 emitted in the chemistry lifecycle. In our own operations, greenhouse gas emissions fell 16 percent between 1990 and 2008—a reduction that would have exceeded the Kyoto Protocol target.
As an energy-intensive and trade-sensitive industry, we emphasize that a climate policy must protect the competitiveness of our industry by helping prevent the leakage of manufacturing production, jobs, and greenhouse gas emission to overseas markets. Climate policy should also recognize the critical need to align emissions reduction timelines with the availability of lowcarbon technologies. Sound climate policy must also prevent runaway fuel switching from coal to natural gas in the power sector and explicitly recognize that the use of hydrocarbons as raw materials does not emit greenhouse gases and therefore should not be subject to regulation.
On June 26, 2009, the House of Representatives approved H.R. 2454, the American Clean Energy and Security Act of 2009. ACC believes that the legislation includes some improvements over past climate bills, recognizing the challenges of energy-intensive U.S. manufacturers. However, ACC believes that more work has to be done to ensure a level playing field for American manufacturers including a focus on the emissions allowance allocation and schedule.
