In For The Long Haul On Climate Change

In late September, Congress and the Environmental Protection Agency moved a little further along on a long trek that might lead to a requirement that U.S. industries reduce their carbon dioxide emissions to limit their contributions to global climate change.

In the Senate, Sens. Barbara Boxer (D-Calif.) and John F. Kerry (D-Mass.) introduced on Sept. 30 the Clean Energy Jobs & American Power Act (S. 1733), the Senate’s version of climate-change legislation that squeaked through the House of Representatives in June. On the same day, EPA Administrator Lisa P. Jackson, speaking in San Francisco, announced an EPA proposal to require companies that emit large quantities of CO₂ to cut their emissions of the greenhouse gas when installing new equipment or when building new plants.

Considering the hurdles ahead and the time needed for implementation of either approach, the on-the-ground impact of actual reductions in CO₂ emissions could be years off. The Senate bill faces an uncertain future with no Republican support at this time. The EPA proposal, which is seen by the Obama Administration as a backstop if Congress fails to act, will face at least a year of debate through public comments, hearings, and requests for new information while the regulation is being drawn up, and it is sure to be challenged in court once finalized.

Meanwhile, the battle over climate-change legislation between industries that stand to win or lose heats up with each passing day.

In full-page newspaper ads in early October, the organization Energy Citizens calls it an “unfortunate truth” that climate-change legislation will result in the loss of 2 million jobs. Members of Energy Citizens include a long list of conservative and anti­tax groups, trade associations, and fossil-fuel-based industries, such as the National Petrochemical & Refiners Association, whose president, Charles T. Drevna, opposes EPA’s proposal and the Senate and House bills.

“We want any legislation to contain realistic long-term strategies that recognize the vital role of the energy sector in general and refining in particular and our role in maintaining the country’s economic strength and security,” Drevna says. The House and Senate approach “fails miserably,” he adds.

When quizzed about details, he says, “I don’t know what we would want when it comes to specific legislation because we haven’t seen anything that is anywhere near anything we could support.”

On the other side, on Oct. 6 and 7, a coalition of some 140 businesses set out to lobby Congress to support climate-change legislation. Calling themselves We Can Lead, the group includes Dow Chemical, along with Hewlett-Packard, Starbucks, Applied Materials, a host of other manufacturers, and several electric utilities. They claim that some 1.7 million new energy jobs will be created through new industries spurred on by climate-change efforts.

“Dow wants certainty,” says Peter Molinaro, the company’s vice president of federal and state government affairs. “We want to be able to control our own destiny. We would like to see a price signal on carbon sooner rather than later, just so we can plan our future.”

At a White House meeting on Oct. 7, the group was urged by top Administration officials, including Energy Secretary Steven Chu, to take their demands to Congress.

“Comprehensive energy legislation will unleash the American innovation machine to create new industries and clean sources of energy to power our economy,” Chu said. “It is the single most important step we can take to secure our economic prosperity and leave a healthier planet for future generations.”

Along with We Can Lead, U.S. Climate Action Partnership, another primarily business organization—which includes Dow, DuPont, BP, Shell Oil, Honeywell, Rio Tinto, and other chemical and petrochemical companies—issued a letter last week supporting climate-change legislation.

The group urged Senate leaders to “embrace policies that put a cap on carbon and therefore a value on clean energy technologies.” Like Chu, it warned that “the alternative is for America to watch from the sidelines as other countries invest heavily in the next great global industry.”

So far, however, the Senate bill has no support from Republican members, and Democrats are now searching for ways to gain their backing.

The 821-page bill was incomplete when introduced and considered by Boxer and Kerry to be a draft (C&EN, Oct. 5, page 10). It is missing several sections of critical importance, particularly provisions laying out details of a greenhouse gas cap-and-trade system that is needed to provide marketplace incentives to cut CO₂ emissions.

Overall, the Senate bill calls for a 20% reduction by 2020 in greenhouse gas emissions, based on 2005 emissions levels, 3% more than in the House-passed bill. By 2050, emission reductions under both bills are to reach 83% of 2005 levels.

Boxer, chair of the Environment & Public Works Committee, said recently that she hopes her committee can pass a bill by mid-November. However, five other Senate committees have jurisdiction over provisions of the climate-change legislation: the Energy & Natural Resources, Agriculture, Commerce, Foreign Relations, and Finance Committees.

Of most importance is the Finance Committee, which shares jurisdiction over the cap-and-trade provisions with Boxer’s committee. Such provisions are particularly important to chemical companies and other industries that consume lots of energy and operate in highly competitive global markets (C&EN, June 15, page 22).

It is unlikely that a bill will clear the Senate until next year, according to Kerry and Carol M. Browner, a White House environmental adviser and former head of EPA, who recently spoke at a conference sponsored by Atlantic magazine.

Meanwhile, on a second front, EPA has proposed that large CO₂ emitters—chemical companies, electric utilities, and other industries—reduce carbon emissions when making plant modifications or when building new factories. The provision is part of the Clean Air Act’s new source review section that requires companies to install “best available control technologies” when making changes that increase pollution emissions.

EPA’s legal justification for the provision is a 2007 Supreme Court ruling that EPA has authority under the Clean Air Act to regulate greenhouse gas emissions, a view that had been rejected by the George W. Bush Administration.

The Clean Air Act, however, sets a low threshold—250 tons of annual emissions—which would require a huge number of CO₂ sources to be covered by the CO₂ regulation. So EPA’s proposal raised that trigger to 25,000 tons of CO₂ annually.

EPA’s Jackson called the proposal “a commonsense rule that is carefully tailored to apply to only the largest sources.” She estimates some 14,000 large sources would be covered, which are responsible for about 70% of the U.S. stationary-source greenhouse gas emissions. However, it might take as long as five years before all the plants would have to comply, EPA estimates.

Industry opposition to the proposal has centered on the 25,000-ton threshold.

Jackson was aware of that criticism when she announced the proposal in San Francisco. Warning that opponents would claim EPA was regulating “everything from cows to the local Dunkin’ Donuts,” Jackson said, “that is not going to happen.

“We have carefully targeted our efforts to exempt the vast majority of small and medium-sized businesses. We know the corner coffee shop is no place to look for meaningful carbon reductions,” she said.

However, Jeffrey R. Holmstead, formerly a top Bush Administration EPA air official and now a corporate attorney, thinks otherwise. He says Jackson is trying to “fit a square peg into a round hole,” and the Clean Air Act threshold of 250 tons will include millions of buildings, schools, churches, and hospitals. The 250-ton threshold, he says, cannot be changed without an act of Congress and will not survive litigation.

Industries that oppose the climate-change legislation and cap-and-trade approaches immediately locked in on the threshold and promised to sue if EPA raised it, thereby blocking the regulation’s implementation.

“The Clean Air Act stipulates unequivocally that the threshold to permit major sources is 250 tons for criteria pollutants,” Drevna says.

An irony of Drevna’s approach is that industries that oppose climate-change legislation are threatening to sue to increase the number of sources that are covered by regulations they find onerous.

Drevna has a warning for companies that see climate change as a “boon to their bottom line.” He says: “They tend to forget that this economy is tied together, and without a strong, vibrant, robust refining and petrochemical industry, it is the American consumer who is going to suffer. Individual companies are looking at short-term gains, not the long-term implications.”

Citing Obama’s goal of 1 million electric cars on the road by 2016 as an example, Drevna says these would be “supplements” to cars that run on gas, not “alternatives.”

“There are 250 million cars out there today that need gas and diesel fuel,” Drevna says. “They are not going to go away.”

But for Dow, Molinaro says, “energy is a clear area of opportunity for us. We know there is going to be a need to address energy. Are you terrified of sea-level rise or $150 barrels of oil? The solutions are the same: energy efficiency, renewable energy, energy from the sun, all of those things.”

Dow is looking at what Molinaro calls “megatrends” in social and economic drivers to help plot the company’s future business strategy. “We see solutions chemistry can provide for energy and climate change,” he says. “At the same time, we are an emitter of CO₂. It is inescapable. We use fossil energy as fuel and raw material. We have to be involved in the legislative process to plan for the future and to reduce our risk.”

Dow, he says, is trying to find and tap into megatrends in energy and other areas. He points to solar roof shingles and a host of new energy-related products the company is making (C&EN, Oct. 12, page 25). Stuck in Washington, D.C., traffic as he is being interviewed, he says: “Look, I am sitting here in a hybrid Prius and there are three Priuses ahead of me. Now that tells you something about the importance of megatrends.”