A climate-change bill that mandates a 20-percent reduction in carbon emissions by 2020 and would raise costs for aluminum and steel producers is under fire from the steel industry.

The requirements in the Clean Energy Jobs and American Power Act, introduced in the Senate, are more stringent than legislation that squeaked through the House by a 219-to-212 vote this summer calling for a 17-percent reduction by 2020.

Senate Environment and Public Works Committee chairwoman Barbara Boxer (D., Calif.), who introduced the new bill with Sen. John Kerry (D., Mass.), said the legislation "will cut carbon pollution and stimulate the economy by creating millions of jobs in the clean energy sector."

But Thomas A. Danjczek, president of the Steel Manufacturers Association (SMA), said the bill is flawed, would jeopardize American jobs and result in higher cost-of-living expenses for private citizens, with the average family paying $1,780 in costs. "Certainly this bill needs to evaluated on the impact of its regulation," he said.

"We are concerned that this bill is a major step backwards from the House version of the bill as it will put even greater pressure on energy intensive, trade-sensitive industries such as the steel industry," said Thomas J. Gibson, president and chief executive officer of the American Iron and Steel Institute.

Calling for a ceiling to be imposed on carbon emissions in three years, the Senate legislation proposes a gradual tightening of allowable emissions?3 percent lower in 2012 compared with 2005, 20 percent lower in 2020, 42 percent lower in 2030 and 83 percent lower in 2050.

The House bill, the American Clean Energy and Security Act, and the Senate version include the same long-term emissions restrictions.

Both also allow carbon emitters who exceed the guidelines to purchase emission allowances through the suggested implementation of a cap-and-trade system.

The draft Senate legislation does not detail how the money collected for emission allowances would be distributed, an aspect likely to come under heavy scrutiny and debate when the bill is marked up.

"The bill will establish an allowance rebate program similar to that in the House bill, but it does not provide the specificity needed to ensure that the program will be adequate to address the full impact of the bill on energy-intensive, trade-exposed industries," Gibson said.

"Meanwhile, there is only a placeholder for an as-yet unwritten border adjustment provision that will be critical to preventing the leakage of jobs and emissions from the United States that will result from this legislation," he added.

The Senate and House versions also are similar in that they advocate the creation of a U.S. Environmental Protection Agency program to label the carbon content of merchandise. The bill specifies that carbon-intensive products, including aluminum and steel, will be prioritized for labeling.

The Senate's bill specifically notes that integrated and electric furnace steelmakers, as well as coke-making operations, will be categorized as iron-and-steel sector entities.

If other nations are found to have not developed their own carbon emission strategies, the bill merely requires Congress to be informed. "If the administrator determines that China and India have not adopted greenhouse-gas emission standards at least as stringent as those set forth in this act, the administrator shall notify each member of Congress of his determination and shall release his determination to the media," according to the draft of the legislation.

"This bill does not have border adjustability. It has no teeth," Danjczek said. "We cannot have flawed legislation that does not have the need for global participation to avoid leakage." He was disappointed that the EPA's authority to regulate carbon dioxide emissions was not removed in the proposed legislation.

Danjczek said that an imposed price cap on allowances is a positive aspect to the legislation as it would eliminate spikes in prices. "While it is still a bad bill, it has an element better than other legislation in that it has a carbon collar limiting it to $28 a ton. This is one worthwhile provision as steelmakers are at an advantage knowing what the cost cap would be," he said.

Gibson said much more needs to be done to make the Senate bill acceptable. "If we don't get climate legislation right, we'll harm the U.S. economy, outsource our manufacturing to China and see global emissions increase the exact opposite of the goals of climate policy," he added.

Source: Metal Bulletin, September 30, 2009