Industry groups lobby against climate legislation
If you want to get some sense of what Lieberman-Warner — or any piece of climate legislation — is in for when it hits the floor of the Senate, have a look at what its opponents are saying.
Below are three letters to the Senate Environment Committee, from the Chamber of Commerce, the National Mining Association, and a front group called the Alliance for Energy and Economic Growth. You’ll see the message that’s going to be deployed against Democrats in Congress and the presidential primary. All the letters share common themes:
- It will cost consumers money on energy bills.
- It will send jobs and industries overseas, because China and India aren’t subject to the same restrictions.
- It doesn’t contain enough pork for the coal and nuclear industries.
Study this stuff. We’ll be dealing with it for a long time.
The Chamber of Commerce:
Dear Chairman Boxer and Ranking Member Inhofe:
The U.S. Chamber of Commerce, the world’s largest business federation representing more than three million businesses and organizations of every size, sector, and region, strongly opposes S. 2191, the “Lieberman-Warner Climate Security Act of 2007.”
As Chamber President and CEO Thomas J. Donohue previously communicated in testimony to your Committee on June 28, 2007, the Chamber hinges our support for climate legislation on whether it satisfies five core principles: it must (1) preserve American jobs and the economy, (2) address the international nature of global climate change, (3) promote accelerated technology development and deployment, (4) reduce barriers to development of climate-friendly energy sources, and (5) promote energy efficiency measures. The Chamber opposes S. 2191 because it fails to satisfy several of these principles.
First, S. 2191 fails to preserve American jobs and the domestic economy. As Dr. Anne Smith of global research firm CRA International stated to the Committee on November 8, 2007, S. 2191 could cost America 3.4 million additional jobs, a $1 trillion decline in GDP, and a doubling of wholesale electricity prices between now and 2050. The bill requires American companies to undertake dramatic emissions reductions regardless of whether its economic competitors do the same, at least prior to the year 2019. As utilities are forced to move off coal, Dr. Smith predicts that natural gas demand for electricity generation will increase by as much as 66 percent over the next 20 years. By then much of the United States’ energy-intensive industry could be gone, having either shut down or moved overseas. The chemical industry has already largely moved overseas because it cannot compete in the world market while complying with domestic energy constraints and emissions controls; how many other American businesses will be forced to follow suit?
Second, S. 2191 does not adequately address the international nature of global climate change. The domestic emissions constraints imposed by S. 2191, without corresponding long-term cutbacks in greenhouse gas emissions from other nations (particularly developing nations), will not only fail to make the required impact on levels of greenhouse gases in the atmosphere, but could also irreparably harm the country’s ability to compete in the global market. Any long-term climate change action plan absolutely must include developing nations such as China and India. Chinese emissions are projected to increase 119 percent and Indian emissions 131 percent between 2004 and 2030.1 Without engagement by developing nations, the carbon constraints imposed by S. 2191 would penalize domestic businesses attempting to compete in the world market while non-participating developing nations continue to get a free ride.
Third, S. 2191 does not promote greenhouse gas reducing technologies — such as clean coal and nuclear energy — at a substantial enough level or a fast enough pace to compensate for the bill’s aggressive emissions constraints. Dr. Margo Thorning of the American Council for Capital Formation testified before your Committee that U.S. per capita emissions would have to be reduced about 25 to 35 times greater than what occurred from 1990 to 2000 to meet the targets of S. 2191, and the technologies simply do not exist to reduce emissions to this extent without severely reducing the growth of the U.S. economy and employment. With respect to clean coal, Title IV of the bill does attempt to use a percentage of early-and annually-auctioned credits to fund low-carbon and zero-carbon energy technologies, but this meager step is not nearly enough. According to The Future of Coal, a report released in March 2007 by a consortium of faculty and energy experts at MIT, it will take a $5 billion, 10-year program to research, develop, and demonstrate on a realistic scale the technology necessary to capture and store carbon dioxide from coal-fired power plants.2 And coal, despite the efforts of many in Congress, is not going anywhere: the Energy Information Administration (EIA) projects electricity generation from coal to rise from about 2 trillion kilowatthours (kWh) today to well over 3 trillion kWh by 2030.3 With such little funding for research, carbon capture and sequestration technology will not be cheaply or readily available to entities covered by S. 2191 by the time the caps are in place and begin to decrease annually. Coal is vital to the United States’ energy future, and paltry funding for clean coal technology is completely unjustifiable. Moreover, while coal receives paltry funding under S. 2191, nuclear power receives no funding whatsoever: S. 2191 fails to support in any way the research, development and expansion of new nuclear power facilities. In fact, the word “nuclear” does not appear in the text of the 303-page bill even once. Such obvious oversight of a clean and safe energy technology that will be absolutely necessary in a carbon-constrained environment is yet another reason the Chamber cannot support S. 2191.
Finally, S. 2191 does very little to reduce barriers to development of climate-friendly energy sources. In the regime imposed by S. 2191, clean coal and nuclear power will not be readily available to meet our energy needs. And if the recent death sentence for the Cape Wind project is any indication, the U.S. may not even be able to site or permit renewables. That leaves natural gas as the only legitimate replacement option for electricity generation. But S. 2191 has no mercy on natural gas, either (and was recently amended to add an “upstream” cap on emissions from natural gas processors, crippling natural gas users even more). Increased natural gas production costs from the bill could result in decreased investment and the shutting down of marginal natural gas wells. S. 2191 would likely exceed the less stringent Lieberman-McCain bill, S. 280, which had been projected to reduce U.S. natural gas production by up to 11 percent by 2030. Moreover, a recent study by Pennsylvania State University found that EIA has overestimated natural gas supply and under-estimated corresponding demand in the electric power sector,4 calling into serious question whether natural gas can handle the demands of industrial, commercial and residential consumers if legislation like S. 2191 forces the United States to move off coal.
For these reasons, the Chamber opposes S. 2191.R.
Cc: Members of the Committee on Environment and Public Works
1 International Energy Agency, World Energy Outlook 2006, available at http://www.iea.org/textbase/weo/index.htm.
2 Deutch, J., and Moniz, E., The Future of Coal: An Interdisciplinary MIT Study, March 14, 2007, available at http://web.mit.edu/coal.
3 Energy Information Administration, Annual Energy Outlook 2007, available at http://www.eia.doe.gov/oiaf/aeo/index.html.
4 Considine, T.J., and Clemente, F.A., "Evaluating Forecasts of Natural Gas Markets: Implications for Modeling and Policy Analysis," International Energy Workshop 2007 (June 2007), available at http://www.internationalenergyworkshop.org/pappdf/Considine.pdf.
The National Mining Association:
Madame Chairman and Ranking Member Inhofe:
The National Mining Association (NMA) is ready and prepared to work with you, members of the Environment and Public Works Committee and all interested senators on a constructive technology-based policy framework to address climate change. However, NMA is opposed to the "America’s Climate Security Act" (S. 2191).
NMA represents more than 325 companies involved in all aspects of the mining industry including coal, metal and industrial mineral producers, mineral processors, equipment manufacturers, state associations, bulk transporters, engineering firms, consultants, financial institutions and other companies that supply goods and services to the mining industry.
As a general matter, it is not economically feasible to meet the greenhouse gas (GHG) emissions reductions proposed under S. 2191 without the technologies to achieve them. S. 2191 fails to adequately provide for the development, demonstration and commercial deployment of advanced clean coal and carbon capture and storage (CCS) technologies that will enable the continued utilization of America’s most versatile, abundant and affordable energy resource — coal.
Coal powers more than 50 percent of U.S. electricity generation, with the U.S. Energy Information Administration forecasting that number to grow to 57 percent by 2030. The reasons are simple — the United States posses more than 240 years worth of coal reserves, and on an output basis, our nation has more energy reserves in coal than Saudi Arabia has in oil. The abundance, availability and affordability of coal when compared to other energy resources also explains why consumer electricity costs are low in regions where it is the predominant fuel source for generation. Policies that disrupt the ability of generators to use coal for electricity production will necessarily and adversely impact consumer electricity rates and costs. The economic consequences of S. 2191, as acknowledged by Sen. Joe Lieberman (I-Conn.) during subcommittee mark-up, will be enormous. Indeed, an independent analysis performed by Charles River and Associates discussed before your committee shows staggering costs to the economy and working families.
S. 2191 further lacks a general cost-containment mechanism to avoid harm to the economy and consumers. Nor does the bill account for meaningful participation from major economic trade competitors such as China and India, among others. The bill also lacks the needed regulatory and liability framework necessary to accelerate the deployment of commercial-scale CCS technologies.
The U.S. mining industry has long advocated technology-based solutions for mitigating greenhouse gas emissions. Advanced clean coal and CCS technologies offer the most promising near-term solutions to this issue because they will allow us to continue to use affordable coal-based electricity generation to power America. And yet S. 2191 fails to provide sufficient and sustained funding to assist in the public-private partnerships needed to help develop, demonstrate and deploy these critical technologies on a commercial scale.
For these reasons, we oppose S. 2191 and urge the committee to develop policies that accelerate the research, development, demonstration and deployment of clean coal and CCS technologies that will ultimately prove far more effective in reducing greenhouse gas emissions globally than the proposal presently before the committee.
Thank you for your consideration of our views and we hope to work with you and your colleagues to bring them to fruition.
Kraig R. Naasz
President & CEO
cc: Environment and Public Works Committee Members
The Alliance for Energy and Economic Growth:
Dear Chairman Boxer and Ranking Member Inhofe:
The Alliance for Energy and Economic Growth (AEEG), a broad-based coalition of more than 1,200 companies and organizations representing energy producers and consumers, supports the goal of addressing global climate change in a manner that protects U.S. jobs and economy, but is very concerned that the Senate plans to move forward with S. 2191, the "Climate Security Act," without adequately considering the consequences such legislation will pose to the American economy. S. 2191 imposes major new requirements on American business and industry without sufficiently funding the research, development and commercial deployment of essential new technologies or protecting American consumers and the competitiveness of U.S. industry. The result would be significantly higher and more volatile energy costs for U.S. consumers, considerable harm to the economy, and millions of lost American jobs, with questionable impact on global greenhouse gas concentrations.
The Committee heard analyses of the economic costs of S. 2191 at hearings on November 8, 2007. Dr. Anne Smith of CRA International testified that S. 2191 could cost America 3.4 million additional jobs, a $1 trillion decline in GDP, and a doubling of wholesale electricity prices, all by the year 2050. Dr. Margo Thorning of the American Council for Capital Formation stated that U.S. per capita emissions would have to be reduced about 25 to 35 times greater than what occurred from 1990 to 2000, and the technologies simply do not exist to reduce emissions to this extent without severely reducing the growth in the U.S. economy and in employment.
As the statements of Dr. Smith and Dr. Thorning make clear, the emissions reduction schedule in S. 2191 would place the American economy at significant risk. Yet, in the face of these startling economic analyses, and without the economic impact estimates of S. 2191 requested from Energy Information Administration and Environmental Protection Agency by Senators Lieberman and Warner, the Committee intends to push forward with a markup of the bill this week.
AEEG instead recommends harmonizing emissions reduction requirements with the availability of existing and emerging, lower and non-carbon technology options, which could reduce these costs and mitigate more severe economic disruptions. We support policies to promote the accelerated development, demonstration and global deployment of climate-friendly technologies, and we want to work with you to remove financial and regulatory barriers that stand in the way of harnessing America’s ingenuity in energy technology.
AEEG also worries that S. 2191 will dramatically increase the demand for natural gas for the purpose of the power generation, and domestic natural gas producers will not be able to meet this demand. Limitations on access to America’s natural gas resources have caused domestic natural gas producers to struggle to keep up with the demand of American consumers. With huge portions of the natural gas resource base off limits to environmentally responsible production, supply would be unable to keep pace with the additional demands created by the cap-and-trade system created by S. 2191. We fear that the result will be vastly increased costs to consumers and businesses in every part of the country. Moreover, the inclusion of natural gas residential and commercial customers in the program will further increase their energy bills. AEEG strongly recommends that any climate change program address the need to free up the new natural gas supplies that will be essential to reaching our climate change goals.
We also are concerned that the bill does not include an effective cost containment safeguard. Rather, S. 2191 establishes a "Carbon Market Efficiency Board" (Board) with limited authority to adjust the ways in which a regulated entity can meet its annual compliance obligation by expanding offsets or by borrowing and paying back allowances. The Board would select certain facilities for modest relief in the short term, but this approach is fraught with uncertainty, fails to establish a clear price signal, and merely postpones economic hardship. Inclusion of a mechanism to give confidence in the cost of cap-and-trade legislation is essential to managing and containing costs in a manner that protects U.S. jobs and provides for economic growth.
AEEG believes that Congress should support policies that strengthen our global competitiveness and avoid imposing costly greenhouse gas emissions regulatory programs without the participation of developing nations, such as China and India. This is necessary to prevent outsourcing of jobs and the export of emissions overseas, ensure that total global emissions are reduced and that the economic burdens associated with climate change are borne equitably. We are concerned that S. 2191 requires U.S. companies to undertake dramatic emissions reductions regardless of whether its economic competitors do the same, at least prior to the year 2019. By then, much of the United States’ energy-intensive industry could be gone, having either shut down or moved overseas.
Finally, climate change legislation should establish consistency among regional and state greenhouse gas reduction efforts. Consistency is necessary to reduce regulatory uncertainty and increase the efficiency and effectiveness of climate change policy, yet S. 2191 fails to address this issue as well.
For these reasons and others, we believe that S. 2191 would impose substantial penalties on the U.S. economy, consumers and working families, and would do little to ensure technology development and global participation essential to achieving meaningful reductions in greenhouse gas emissions. We thank you for your consideration and look forward to working with you towards achieving a workable and effective solution to global climate change concerns.
Alliance for Energy & Economic Growth
Cc: Members of the Committee on Environment and Public Works