Statement

ACC Comments on Revised House Climate Legislation

Some Improvements Made, But Trade-Vulnerable Industries Language Must Be Changed to Maintain Competitiveness of Energy-Intensive Manufacturers

ARLINGTON, VA (May 21, 2009) – This evening the U.S. House Committee on Energy and Commerce approved “The American Clean Energy and Security Act of 2009 (H.R. 2454).”  Additional information is available at http://energycommerce.house.gov/.

American Chemistry Council (ACC) President and CEO Cal Dooley issued the following statement:

“We believe committee members have made a number of positive changes to the legislation.  The bill’s emission reduction target/timetable, treatment of energy feedstocks, and energy efficiency provisions represent improvements over past versions.  However, some of the key issues related to the competitiveness of energy-intensive manufacturers have not yet been adequately addressed, and changes are necessary.

Specifically, we are very concerned that the emissions allocation provision for trade-vulnerable industries (Title VII, Section 782) treats energy-intensive industries differently from every other U.S. sector. The bill assigns a baseline year of 2005 for energy-intensives versus a flexible, multi-year base period for other sectors.  The year 2005 was a low-emission one for the chemical industry due to hurricane-related production disruptions, and the designation puts chemical makers at a disadvantage despite the significant greenhouse gas emissions reductions the industry has achieved over the past two decades.  The bill also employs a different emission allowance schedule for energy-intensive industries as compared with other sectors, reducing allowances over time and unfairly depriving energy-intensive manufacturers of receiving more than 200 million allowances through 2021, at an estimated cost of more than $5 billion.

The emissions allocation schedule is vital to the effectiveness of climate policy, helping to facilitate the transition to a lower-emission economy and prevent the ‘leakage’ of U.S. production, jobs and emissions to other nations. As the bill moves forward, we’ll be working hard to achieve changes to this and other provisions, preserve the improvements made to date, and add important new policies such as expanded domestic oil and natural gas production. Our recommendations include:

Targets and Timelines – The bill currently calls for a 17 percent greenhouse gas emission reduction through 2020 for covered entities.  Given uncertainty surrounding the development and deployment of carbon capture and storage and other low-emission technologies, we suggest a lower reduction target through 2020, with larger emissions reductions during later years. 

Competitiveness – We appreciate that the Inslee-Doyle proposal was included in the bill, and support the decision to allocate 15 percent of emission allowances to energy-intensive industries such as the business of chemistry.  We do not support the use of sector efficiency averages as the basis on which a facility will receive allowances. We strongly support changing the emission allowance baseline year and schedule to create equal treatment of energy-intensive industries and other U.S. sectors.

Technology Deployment – Deploying low-carbon technologies remains one of the critical elements of a successful climate program.  While the revised bill includes some incentives and mandates to promote and deploy certain types of ‘clean energy,’ such as energy efficiency, carbon capture and sequestration, renewable energy and nuclear energy, the level and scope of clean energy technology investment must be substantially increased in order to reach emission reduction targets.  Among these additional types of investment, technologies such as Combined Heat and Power (CHP) merit equal investment with other clean energy technologies.

Domestic Energy Supply – Affordable, available energy is closely linked to climate policy. In addition to direct compliance and indirect purchased electricity costs, chemical makers will incur higher energy costs as a consequence of climate policy. Natural gas is key to reducing emissions, as it is used for renewable energy production, for the manufacture of energy efficient materials and as a lower-carbon electricity source.  Unfortunately, the regional nature of natural gas pricing combined with restrictive U.S. energy policies means that U.S. consumers face higher natural gas prices than those in nations whose policies lead to more available natural gas. These policies put U.S. chemical makers and other manufacturers at a disadvantage in global markets while making it more difficult for the nation to meet emission reduction targets. Congress must pass a comprehensive, bipartisan national energy policy that improves energy security, reduces greenhouse gas emissions and ensures that U.S. companies have access to competitively-priced natural gas.  Improved access to natural gas supplies is an important component of a national energy policy – we must assure that American resources are available to smooth the transition to a lower-carbon economy.”

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