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Steelmakers Disappointed by the Latest Climate Bill

The American Iron and Steel Institute expressed disappointment in the Boxer-Kerry climate bill, known as the Clean Energy Jobs and American Power Act, introduced Sept. 30 by the Senate Environment and Public Works Committee.

The bill, authored by Democratic Senators Barbara Boxer and John Kerry, calls for cutting the nation’s greenhouse gas emissions 20 percent from 2005 levels by 2020 and 83 percent by 2050. While it goes further than a House bill passed in June that set a target of a 17 percent reduction by 2020, it reportedly includes some reassurances for the U.S. business community, including provisions that would make carbon offsets more affordable.

This latest, more ambitious effort to curb global warming will no doubt face strong opposition from industry groups, including steelmakers.

“We are concerned that this bill is a major step backwards from the House version, as it will put even greater pressure on energy-intensive, trade-sensitive industries such as the steel industry,” says Thomas J. Gibson, president and CEO of AISI in Washington, D.C. “The economic burden being imposed on the industry is greater in this bill, with a 20 percent emissions reduction required by 2020.”

While the bill’s sponsors insist it is a pollution reduction plan, not a “cap and trade” plan, it does contain carbon trading provisions. Cap and trade or carbon trading is a system designed to steadily reduce harmful emissions by placing a cap on the amount companies can emit. Each company would need an emissions permit for every ton of carbon dioxide it releases into the atmosphere. More efficient companies that are able to reduce their emissions below their allowance would be able to sell their excess permits to other companies that cannot make reductions as easily. To curb speculation in the carbon market, the new bill reserves allowances in a market-stability fund to help ensure that the price of those allowances would not exceed $28 per ton.

While the bill would establish an allowance rebate program similar to that in the House bill, it does not provide the specificity needed to ensure that the program will be adequate to address the full impact of the bill on energy-intensive, trade-exposed industries like steel, maintains Gibson at AISI. “There is only a placeholder for an as-yet-unwritten border adjustment provision that will be critical to preventing the leakage of jobs and emissions from the United States as a result of this legislation,” he adds

Perhaps the biggest concern among steelmakers and other opponents of all the climate change legislation proposed to date is that it does not assure comparable carbon reductions by competitors in other parts of the world. Placing restrictions on domestic manufacturers will raise their costs and make them less competitive, they argue, causing production and jobs to migrate to other countries with less restrictive environmental rules.

“Clearly, much more needs to be done to make this bill acceptable,” Gibson says. “We will be working to address these issues with senators who have expressed their commitment to ensuring a level playing field for American manufacturing.

“If we don’t get climate legislation right, we’ll harm the U.S. economy, outsource our manufacturing to China and see global emissions increase—the exact opposite of the goals of climate policy.”



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