Interagency report on international competitiveness and climate regulations released

On December 2, a number of collaborators from several federal agencies released a report [PDF] at the request of five Senators from manufacturing states: Evan Bayh (D-IN), Sherrod Brown (D-OH), Arlen Specter (D-PA), Debbie Stabenow (D-MI), and Claire McCaskill (D-MO).

The original letter from the Senators asked that the Administration offer an analysis of four primary points:

1. Determination of which industries will likely be eligible for the energy-intensive, trade-exposed (EITE) industry allocations provided in the American Clean Energy and Security Act of 2009 (HR 2454);
2. Assessment of the potential impacts of this legislation on EITE industries;
3. Identification of additional data that would be useful for determining trade impacts, allocation requirements, and greenhouse gas emission in other countries; and
   
4. The other measures within ACES that could help to mitigate the effects of a cap-and-trade system on EITE industries.

The report is thorough and impressive in its scope and depth. The executive summary states:

The modeling indicates that, even absent the mitigating allocation measures, total annual emission leakage to unregulated countries associated with a cap-and-trade program’s impacts on the international competitiveness of domestic “trade-vulnerable” industries is likely to be only on the order of 10 MMTCO2e. The modeling projects that the vast majority of emission reductions achieved by these industries under a cap-and-trade program will be from reductions in the emission-intensity of their production (e.g., increased energy efficiency, or shifts to lower-emission production methods), rather than from declines in production associated with increased imports from unregulated countries. Importantly, while output-based allocations can essentially eliminate the leakage that is associated with the reduced international competitiveness of domestic industry, if carefully designed, these allocations can do so while preserving incentives for industry to reduce the emission-intensity of its production. With such allocations, leakage associated with impacts on the international competitiveness of domestic industries falls to about one MMTCO2e, or about one percent of the estimated emission reductions from those industries.

There are several caveats outlined in the full report, as well as potential issues with the administrability of the EITE provisions of ACES.

ACEEE commends the report's authors for their hard work, and we hope that this will help to pave the way for Senate legislation that will lead to a more energy-efficient, rejuvenated, competitive, and sustainable manufacturing sector in the United States.

Manufacturers Worse Off Under Kerry-Boxer Climate Bill Emissions Allocation Scheme

On Friday, October 23rd, the EPA released its scoring of the Clean Energy Jobs and American Power Act (S. 1733), also referred to as the Kerry-Boxer Climate Bill. The EPA found that the costs of Kerry-Boxer do not differ greatly from the Waxman-Markey climate bill. Both bills are expected to cost around $100 per household. However, this analysis does not fully account for energy efficiency provisions, which ACEEE estimates could save as much as $36 billion by 2030.

On the same day, Senator Boxer released the Chairman's Mark of the Kerry-Boxer bill. This version filled in some of the major sections left out of the original bill. One of the most anticipated sections was the greenhouse gas emissions allocations. The percentage allocations for "energy-intensive, trade-exposed" (EITE) industries are almost the same as the House-passed Waxman-Markey bill, except the Senate bill allocates slightly more allowances in the early years (4% instead of 2% in 2012 and 2013). However, there are about 1% fewer allocations in the Senate bill because it has a slightly stricter emissions cap. Much more importantly, about 20% of lifetime allowances are set aside for other purposes before the rest of the allocations are divvied up. Even though EITE industries receive more allowances in the first two years, the Senate bill will result in about 15% less allowances than the House bill. The Senate bill gives about 6% of all allowances over the life of the bill to EITE industries, while the House bill gives about 8%.

Both the Waxman-Markey and the Kerry-Boxer bills compel the program administrator to determine eligible facilities based on the following criteria: Any manufacturing facility that has either an Energy Intensity or a Greenhouse Gas Intensity of at least 5% AND has a Trade Intensity of at least 15% is eligible. Additionally, any facility has an Energy Intensity or a Greenhouse Gas Intensity of at least 20% is also eligible. It should be noted that only about 1.3% of US manufacturing facilities would be directly affected by a carbon cap.

Definitions:
- Energy Intensity: $energy / $shipments;
- Greenhous Gas Intensity: (20 * Tonnes-CO2e) / $shipments;
- Trade Instensity: ($imports + $exports) / ($imports + $shipments) of the sector;

However, there are still issues with administrability, particularly data collection, that have yet to be properly addressed. In many cases, data for each industry (at the six digit NAICS code level) is not readily available, and current estimates often use surveys such as the Manufacturing Energy Consumption Survey, which are not designed to provide information with the precision required.

Baldwin Amendment Incorporated into ACES

On Tuesday, an amendment offered by Representative Tammy Baldwin (WI-2) was adopted by the House Energy and Commerce Committee into the American Clean Energy and Security Act (ACES) of 2009 (co-sponsored by Reps. Waxman and Markey).

This amendment would establish Building Assessment Centers (BAC) to train students to identify and implement energy efficiency opportunities in existing residential, commercial, and institutional buildings. The BACs would be modeled after the highly successful Industrial Assessment Center program. Furthermore, the amendment would establish "Centers for Energy and Environmental Knowledge and Outreach" to coordinate activities between the IACs, BACs, and Clean Energy Application Centers (formerly CHP Regional Application Centers).

ACEEE played a key role in the development of this amendment and we are thrilled that it was adopted.

Watch video of the amendment's introduction and adoption here.

The full ACES bill (H.R. 2454) passed out of committee last night. Its text can be viewed here.

NY Times - The Future of the Concrete Industry

Substantial advances in low-CO₂ industrial production processes and materials sourcing will be necessary for the country's energy-intensive industries to develop long-term, sustainable strategies in response to any future climate change legislation. The New York Times summarizes a few of these kinds of technological innovations from the perspective of the concrete industry.