Volume 87 Issue 48 | pp. 27-28
Issue Date: November 30, 2009

Industries Fret Over Stalled Climate Bill

Clean energy manufacturers see lost opportunity in failure to pass legislation that puts price on carbon
Department: Government & Policy | Collection: Climate Change
News Channels: Environmental SCENE
Keywords: clean energy, climate change, carbon
Credit: Shutterstock
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Credit: Shutterstock

Some 70% of the components for clean energy products sold in the U.S. are manufactured abroad, according to a study by Apollo Alliance, a coalition of business, environmental, and union groups. This fact was cited by Tom Daschle (D-S.D.), former Senate majority leader and senior fellow with the left-leaning think-tank Center for American Progress, during a press briefing in mid-November.

The briefing was held to discuss how the uncertainty surrounding the passage of climate-change legislation by Congress is hurting manufacturers of clean energy products.

“There is a growing consensus in the U.S. and around the world about the inevitability of the new directions the world will take with regard to energy and climate change,” Daschle said. “But the real question is to what extent we in the U.S. are prepared to make that transformation.”

At the briefing, several manufacturers pointed to a 600-MW wind-energy farm in Texas that benefitted from U.S. stimulus money and tax breaks. The project, however, will use wind turbines manufactured in China. When the deal became public, it resulted in angry speeches by elected officials and a quick announcement by the company, A-Power Energy Generation Systems, that it will build a new manufacturing facility in the U.S. But that will happen long after this Texas wind farm is operating.

Daschle pointed to the need for a clear industrial policy in the U.S. to encourage and protect manufacturers during this transition to clean energy technologies. Such a policy is needed to ensure that the fledgling U.S. renewable energy industry will not be outperformed by China, Germany, and other countries that have benefited from market incentives and government aid. These countries already have more experience and a head start in manufacturing energy-efficient and low-carbon-emitting products.

Russell Ford, chief executive officer of ClearEdge Power, a fuel-cell manufacturer, argued that the U.S. needs a “push and pull strategy” with tax and financial incentives to draw new low-carbon technologies into use and a carbon price to put a penalty on high-carbon, energy-wasting technologies.

“The idea that we are going to protect jobs and provide security for ourselves by doing nothing and continue to use the same technologies we have for the last 50 years is flawed thinking,” Ford said. “The status quo is not a winning strategy. We have to be first movers, with investments and pressure to move people toward new technologies.”

Ford stressed that the new efficiency and clean energy technologies exist in the U.S. now, but the drive to bring them to market is missing.

Daschle and others at the briefing noted Congress is far from reaching a consensus in support of a carbon dioxide cap-and-trade system. Increasingly, it appears Congress is deadlocked, despite the growing global market for renewable energy products manufactured outside the U.S.

Molinaro
Credit: Dow Chemical
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Molinaro
Credit: Dow Chemical

Also at the briefing was Dow Chemical’s Peter Molinaro, vice president for federal and state government affairs, who noted the nexus between chemical manufacturing and energy. “Material science is at the center of the solutions to climate change,” he said. “You can’t make a windmill or a solar panel without chemistry. You can’t capture and sequester carbon without chemistry. We see this as a challenge and an opportunity.”

Ever the chemistry booster, Molinaro noted a recent chemical-industry-funded study by the consulting firm McKinsey & Co. finding that for every ton of CO2 emissions generated by chemical companies, 2 tons are saved through the use of clean energy and the energy-efficient products they manufacture (C&EN, Oct. 26, page 18).

Dow, Molinaro said, can profit in several ways from a policy that puts a price on carbon. First, a carbon price will create a market for many of the company’s newer products—solar shingles, energy-efficient wall insulation, and chemicals to help capture and sequester CO2 from coal plants.

Also, a carbon price will rewrite the equation corporations such as Dow use to justify internal capital expenditures. “An energy-efficiency project we do today might not have enough payback to meet our ‘cost of capital’ hurdle, but with a price on carbon, it could,” Molinaro said. “This might move Dow and other companies to the next level of low-hanging fruit when making efficiency-related capital expenditures.”

Molinaro pointed to a “delicate balance” in setting a price on carbon to spur new U.S. energy manufacturing while minimizing the impact of climate policy pricing on existing manufacturers.

The chemical industry in particular supports protections for companies that are high-energy users and are in highly competitive international markets. The fear is that the U.S. will adopt a price on carbon emissions but other countries will not, and products from U.S. companies will be more expensive in international competition or U.S. companies will relocate elsewhere to avoid national carbon charges.

The chemical industry’s main trade group, the American Chemistry Council, is part of a coalition pushing for climate legislation that gives free pollution allowances to chemical companies, steelmakers, and other high-energy industries in competitive international markets. Molinaro notes these free allowances are designed to be a “transition” that will phase out but will keep these industries operating in the U.S., while allowing time for the rest of the world to adopt climate-change policies and emission caps.

However, as climate legislation stalls, clean energy manufacturers must depend on a host of state and federal programs that provide tax breaks, investment funding, and loan guarantees to spur new energy technologies. Congress is considering several stand-alone bills, as well, each designed primarily to help unemployed workers, but each holds the possibility of aiding new energy technologies and manufacturing.

At the briefing, several manufacturers voiced hopes that the developing world may prove to be a purchaser of new U.S. clean energy technologies, noting several international proposals to provide funds for poorer nations to purchase clean energy products, similar to provisions in the recent agreement between China and the U.S. (C&EN, Nov. 23, page 9).

However, Molinaro noted, “we can’t recapture that money for America if we are not developing these technologies.”

Both Molinaro and Daschle believe climate-change legislation is inevitable, but the question is when. They drew comparisons to the multiyear negotiating process needed to pass the Clean Air Act Amendments of 1990, which Molinaro said was “highly complex with strong regional differences and lots of implications similar to climate-change legislation, such as coal versus natural gas.”

He and Daschle also noted that major pieces of legislation frequently are passed by Congress 90 days before or after a national election. Daschle added, “Most bills die five or six deaths before finding eternal life in passage. My guess is you will see the same here. Ultimately, we will see that out of necessity, and in some form, this bill has to pass.”

 
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