Thursday, April 23, 2009

A plan to ease climate bill's impact on manufacturers

Let the games begin!
Long time readers know that it is the politics that will make fortunes, not traditional metrics.
It will be fascinating to see who gets the biggest carveouts. The only investment I see here is in lobbyists.
From ClimateWire via the New York Times:

With climate legislation knocking at the door, American factory workers have every right to be shaking in their work boots.

The faltering economy continues to hurt employment in a sector that has already sent millions of jobs overseas. A price on carbon would put even more pressure on manufacturers, some of the biggest energy energy users in the country.

A report (pdf) released today asserts that the government can deflect that pressure, thereby saving jobs and preventing offshoring, if it gives manufacturers emissions allowances to cope with the higher energy prices a cap-and-trade bill would cause.

"The interest here is, how do we maintain a viable industrial base that provides good, well-paid jobs and benefits while at the same time being competitive?" Joel Yudken, the study's lead author and a former policy analyst for the AFL-CIO, said in an interview.

In the report, entitled "Climate Policy and Energy-Intensive Manufacturing," Yudken and co-author Andrea Bassi forecast how a cap-and-trade bill would affect costs in several U.S. manufacturing industries, including steel, aluminum, paper and chemicals. The study was funded by the National Commission on Energy Policy, a group of industry, union and environmentalist stakeholders known for pursuing climate policies that stretch across party lines.

Free emission permits, for a time

The study's mathematical models found that the climate bill would indeed raise energy prices, saddling the iron and steel industry, for example, with 11 percent higher costs in 2030 than if there had been no carbon price.

With higher costs, manufacturers would become more exposed to the ruthlessness of global competition, which often results in steel and other manufactured goods coming from countries with low production costs. Making less profit for each unit they make in the United States, manufacturers could be tempted to shift production to countries without carbon caps, reducing U.S. employment but simply moving the source of greenhouse gas emissions.

The United States can avoid this path, Yudken and Bassi argue, if it gives the major manufacturing sectors free emissions permits under its cap-and-trade scheme.>>>MORE