American Materials Manufacturing Alliance Holds Conference on Climate Bill Concerns
November 2, 2009

The American Materials Manufacturing Alliance (AMMA) held a press conference this morning to address concerns over the proposed Senate bill, S. 1733, a bill to create clean energy jobs, promote energy independence, reduce global warming pollution, and transition to a clean energy economy, on which the Senate Environment and Public Works (EPW) Committee will be holding hearings this week.

“We have been constructibly engaged over the past number of months to craft a climate change policy that would reduce greenhouse gas (GHG) emissions while protecting our international competitiveness,” opened Cal Dooley, president and chief executive officer of the American Chemistry Council. “We had hoped when this legislation moved to the Senate that we would see further accommodations that would assure that we could protect the high paying manufacturing jobs that are part of our industry. Unfortunately, the draft that is going to be heard in the Environment and Public Works Committee as early as tomorrow is a step backwards.”

A primary concern for the conference speakers is the emission allowances in the proposed Senate bill.

“The latest version of the bill increases the allowance pool in some ways over the first two years and increases supplemental reserves, those are both important first steps. The rest of the bill takes all that away and more,” said Thomas J. Gibson, president and chief executive officer of the American Iron and Steel Institute. He added, “The bill has a severe last minute reduction within the allowances allocated to energy intensive industries trade exposed industries. It also has a steeply declining cap, 20 percent emission reductions by 2020. All of that adds to decrease the amount of allowances available to everyone.”

Gibson elaborated, “The number of allowances dedicated to energy intensive trade industries in S1733 is cut from the house baseline from 63 million allowances through 2020 and by over 2 billion allowances through 2034.”

Dooley suggested that the transition period given would not be realistic.

“You have to have a transition period that allows you to make accommodations,” Dooley said. “You’ve got to ensure that we’re going to have a glide path that allows us to meet the international competition and 20 percent is too high. We were much more comfortable with what President Obama introduced earlier this year at a 14 percent target.”

Donna Harman of the American Forest and Paper Association addressed concerns in energy costs.

“This legislation has no provisions to counter an almost certain rise in energy costs and that’s a huge competitive risk for us,” she explained. “The allowances to energy producers such as utilities are going to take a 16 percent cut so energy prices are subject to an even sharper rise with this bill than even in the House bill. And those higher energy prices will be borne by American manufacturers.”

Dooley added, “We are very concerned about a number of those provisions that will not achieve, we think, effectively the significant reductions in GHG emissions and clearly puts at risk hundreds of thousands of jobs in the U.S. economy.”

The speakers said that U.S. jobs would be at risk as more stringent regulations in the United States could potentially push more manufacturing to countries that do not have such regulations.

“Climate policy should identify all the costs that will be imposed on U.S. manufacturers and it should provide mechanisms to offset those costs until competing countries have equivalent GHG reduction policies,” said Steve Larkin with the Aluminum Association.

“The question is, are we going to adopt a climate change policy that ensures that demand can be met by U.S. companies employing U.S. workers?” Dooley asked. “Unfortunately this legislation will drive many of those companies, many of those jobs outside our borders and also will result in increases in manufacturing in areas which will not have as stringent policies in reducing their GHG gases; it will actually contribute to an increase in GHG gases globally.”

Chinese competition was specifically addressed.

“Last reporting month, September, we produced about 5.7 million tons of raw steel in the United States. China produced 50 million. In the last three years they’ve added as much new steel making capacity as exists in the next two largest steel making countries in the world, U.S. and Japan. China may be a developing economy but the Chinese steel industry is not a developing industry. Until countries such as China are willing to put the same type of controls and restrictions on their world-class industries we’re going to continue to need access to measures that will level the competitive playing field.”

One listener on the call questioned whether that Chinese-produced product was in fact being shipped overseas or used domestically.

“We’ve seen China move into many U.S. markets in the steel making world,” Gibson noted. “During the second quarter the China stimulus was focused on domestic infrastructure and there was a slight temporarily downturn in China exports. But last month China’s export trends have returned to what happened during the downturn. When we entered the downturn China was producing about 1/3 of the world’s raw steel. Since the downturn the rest of the world has throttled back their steel production but China actually has increased. China now produces more than ½ of the world’s steel. … The overall trend has been to send more and more overall material to more overseas markets including the U.S.”

Harman added an additional concern about sending manufacturing overseas. “Climate change is a global problem and if production shifts to China, even if it’s just to satisfy Chinese consumption, and they’re not doing anything to restrict their carbon emissions or reduce their carbon emissions then that will affect us here in the United States. It’s not just about the trade flow, it’s also about the environmental impact of the issue,” she said.

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