Energy Legislation and its Impact
August 4, 2008
One of the key discussion points from April’s IHEA meeting – Going Green – was energy (or emissions) intensity (EI) reduction. When you hear discussions of legislation to “control greenhouse gases,” be sure to identify whether the controls are absolute reductions in CO2 or if they are intensity reductions. The distinctions are key to healthy growth of our industry and our economy.
Hopefully, it is clear that as companies reduce their costs by reducing the amount of energy they consume to do business, they also reduce their CO2 emissions. Unfortunately, most legislation being considered calls for absolute reductions in CO2 – cap-and-trade-type systems fall into this category. Eight different climate-change bills in front of Congress all contain Kyoto-like cap-and-trade. Many establish a new government bureaucracy, the Climate Change Credit Corporation (CCCC), to administer it. The Europeans have tried this approach, but the data shows no CO2 decrease since 1990.
Although CO2 emissions have gone up in the U.S. since 1990, on the basis of CO2 tons per unit of GDP, our emissions have decreased. This is what is meant by EI. It is essentially a measure of improved energy efficiency, and it should be everyone’s goal to reduce EI. Reducing EI will allow a company to grow without necessarily increasing its carbon footprint. Forcing a company to significantly reduce its carbon footprint beyond the ability of existing technology to reduce EI will result in a contraction of that company’s business. A limit on economic activity and growth is the risk we see in most CO2-reduction legislation.
Are you aware that the Lieberman-Warner bill (S.2191), aka America’s Climate Security Act of 2007, calls for a 63% reduction in greenhouse-gas (GHG) emissions by 2050? This is an absolute, not an EI reduction. In your business, do you have any idea how you will cut your energy usage by 63% over the next 40+ years while still growing your business by 10% a year? The impossibility of meeting such unreasonable goals will result in hardships – including financial penalties – for any company, particularly those in the thermal-processing industry.
Clearly, the rationale for imposing these types of restrictions is the belief that man-made CO2 emissions are causing, or at least contributing to, global warming (climate change). As I encouraged in my editorial of July 2007, the science behind global warming is clearly not settled in spite of what Al Gore might want you to believe. In the space of this page, we cannot list all of the ways that science is not supportive of global warming from man-made sources. In fact, there are compelling reasons to believe we have or are about to enter a prolonged period of cooling. Please understand the legitimacy of the science before agreeing to support future reductions in your company’s growth.
Worth mentioning is that, according to experts, the Lieberman-Warner bill will slow American economic growth by trillions of dollars over the next half-century. In terms of temperature, however, if cutbacks are achieved in accordance with the bill’s criteria, it will postpone the temperature increase projected for 2050 by about two years. Consider this year’s candidates closely (Presidential and otherwise) to see where they stand on this issue, which is paramount to economic suicide.
Is there an alternative to cap-and-trade? Eight of the world’s top economists – including five Nobel laureates – met recently at the Copenhagen Consensus. They examined the best ways to tackle 10 global challenges, which included hunger and malnutrition, global warming and terrorism to name just a few. Performing a cost-benefit analysis, these experts were charged with creating a prioritized list showing how money should best be spent to address these challenges.
Research for the project was performed by the lead author of the IPCC report, who noted that spending $800 billion over 100 years to reduce emissions would reduce temperature increases by just 0.4°F by the end of this century. The economists concluded that a better response than cutting emissions would be to dramatically increase R&D on low-carbon energy options such as solar panels and second-generation biofuels. This approach would encourage innovation and drive development/improvement of low-carbon energy technology.
Investing in developing new technologies for “green” energy versus investing billions to reduce the amount of the naturally occurring, naturally produced plant food CO2 appears to be the most sound investment. Maybe we will have something to show for our investment instead of a little less of something. IH