Al Gore s 2006 documentary

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1 The climate change debate is front and center in Washington, D.C., and it should be front and center in your metalcasting facility. An AFS Staff Report Editor s Note: This is the first in a series of MODERN CASTING articles on the politics of climate change. It will examine the broad dynamics of the topic. The next installment of the series will appear in the May issue and discuss the key proposals of the debate as they pertain to metalcasting. Al Gore s 2006 documentary An Inconvenient Truth unleashed intense public interest and examination of the facts, science and potential global impact of climate change through the introduction of greenhouse gases to the atmosphere. Now, increased pressures from environmental groups and growing public concern have spurred policymakers in Washington, D.C., and many states to action. Congressional hearings on climate change have dominated legislative calendars and initiated the introduction of various proposals. As state and U.S. policymakers wrestle with how best to address climate change and consider proposals to limit greenhouse gas emissions, they are looking for input from industry players on how to develop an effective program that does not hinder U.S. competitiveness. Because various proposals are working their way through state and federal legislatures, their final effect on the metalcasting industry is not yet known. This much is clear all metalcasters will be affected. Impact of Legislative Proposals The most common gas that contributes to global warming in the atmosphere, or greenhouse gas, is water vapor, but carbon dioxide emissions account for about half of the remaining gases. Because much of these carbon dioxide emissions are manmade, produced when fuels are burned, they can be targeted for reduction. A recently-passed spending bill (H.R. 2764) has done just that. Many industries now will be required to collect and report data on their carbon dioxide emissions, and key committees are focused on proposals that will cap or limit total greenhouse gas emissions. This mandatory reporting requirement (which takes effect in 2009) is the first step in developing an economy-wide program to limit these types of emissions. 36 MODERN CASTING / April 2008

2 Sens. John Warner (R-Va., pictured left) and Joseph Lieberman (I-Conn.) helped introduce a climate change bill that would establish a cap-and-trade model requiring reductions in carbon dioxide emissions. In August 2007, Sens. Joseph Lieberman (I-Conn.) and John Warner (R-Va.) introduced America s Climate Security Act (S. 2191) to the Senate. The bill was the ninth piece of climate change legislation introduced during the 110 th Congress. It would establish a cap-and-trade model that requires sequenced reduction in emissions limits. The Lieberman-Warner bill would limit greenhouse gas emissions from electric power, transportation and manufacturing sectors to 2005 levels by 2012 and mandate a reduction of 15% by 2020 and a 70% reduction by The end effect would be to regulate the industrial sector both directly and indirectly by requiring emissions reporting and mandating reductions. Estimating a potential non-reduction tax penalty of $15 per ton of carbon dioxide emitted, the cost could reach $450 million per year for the metalcasting industry if there are no reductions from 2005 emission levels by The cost could be higher. Some environmental groups have criticized the proposed emissions cuts for not being severe enough, and Lieberman is expected to offer a substitute amendment extending the scope of the bill. On Nov. 1, 2007, the Subcommittee on Private Sector and Consumer Solutions approved the Lieberman-Warner measure and recommended it to the full Committee on Environment and Public Works, which approved it by a vote of 11-8 on Dec. 5, During debate, Republicans offered amendments to address concerns that the bill would cost U.S. jobs and hurt low-income consumers. Republicans tried but failed to amend the bill with a provision that would remove the emissions caps if China, about to become the world s largest emitter of greenhouse gases, failed to adopt similar restrictions in 10 years. Majority Leader Harry Reid (D-Nev.) has vowed to take up this legislation on the Senate floor in the beginning of June. According to Washington insiders, proponents may find 51 votes to pass this legislation. However, given the concerns of cost and competitiveness, they will find it hard to achieve the 60 votes required to end debate and proceed with a vote to pass the bill. Democrats continue to disagree on the amount of money the govern- MODERN CASTING / April

3 ment should provide as an incentive to lower emissions. The House Issues a Paper The House has yet to formally introduce comprehensive climate change legislation during the 110 th Congress. However, John Dingell (D-Mich.), chairman of the House Energy & Commerce Committee, and Rick Boucher (D-Va.), chairman of the Subcommittee on Energy & Air Quality, have released several white papers on the issue. The first paper argues that the U.S. Where Does Carbon Dioxide Come From? Most people are aware that carbon dioxide, a gas that contributes to the greenhouse effect, comes flowing out of our mouths when our body conducts the process of respiration. But carbon dioxide also is produced throughout the world any time fuels are turned into energy by combustion. That process occurs in a variety of locations, including metalcasting facilities. Here s the breakdown of greenhouse gas producers by economic sector. MC *Source: Climate Change Legislation Design, Committee on Energy and Commerce, October Fig. 1. The industrial sector is the third leading producer of greenhouse gas emissions. The electricity generation industry is responsible for more than a third of the world s greenhouse gas emissions. 38 MODERN CASTING / April 2008

4 should reduce its greenhouse gas emissions between 60 and 80% by All greenhouse emissions from all sectors would be covered by a cap-and-trade program, using government provided emission allowances that can be bought and sold by the emitting facility. This model is based on the idea that a cap-and-trade program is an effective method of tracking and accounting for greenhouse gas emissions and factoring the cost of those emissions into economic decisions. The lawmakers also seek efficiency or performance standards that should contribute to an economy-wide reduction program. The development of a cap-and-trade program presents an interesting situation for regulators. Traditionally, the regulated entity is the source that emits the gases and is capable of installing controls to reduce its emissions. In a cap-and-trade program, the point of regulation could be set at one of various points along the stream of economic The Lieberman-Warner bill would limit greenhouse gas emissions to 2005 levels by 2012 and mandate a reduction of 15% by 2020 and a 70% reduction by activity that results in greenhouse gas emissions. For example, since the carbon content of fuel is an accurate measure of the carbon dioxide emitted when the fuel is burned, refiners or importers could be the point of regulation for the transportation sector. As long as emissions are accounted for once and only once, the point of regulation does not have to be consistent for all sectors and emission types. The paper underscores the complexity of including the manufacturing sector in the cap-and-trade program and indicates that setting a workable point of regulation will require a comprehensive understanding of the chain of economic activity from fuel extraction to fuel use. As downstream users, this presents an opportunity for metalcasters to engage in the debate on where this point of regulation should occur. If the point of regulation for the manufacturing sector were placed downstream, the cap-and-trade program could not possibly include all of the approximately 350,000 manufacturing facilities in industries that emit carbon dioxide from fossil fuel combustion. Trying to include all manufacturing facilities in the cap-andtrade program would add administrative burden to the program. Dingell and Boucher are proposing a threshold that would cover close to 4,900 units and 99.6% of the emissions from the manufacturing sector by including only large emitters in high-emitting sectors and include complementary measures that would either mandate or provide incentives for emission-reducing activities in uncovered sources. A House White Paper, Reprise Dingell and Boucher s second white paper focused on competitiveness in MODERN CASTING / April

5 the global marketplace. With the imposition of an economywide cap-and-trade program, the cost of producing some American products may increase, and U.S. manufacturers are particularly concerned that comprehensive climate change legislation would hinder their ability to compete with developing countries that do not have strict carbon dioxide emission limits or cap-and-trade programs. The lawmakers wrote that limiting greenhouse gas emissions in the U.S. and other developed countries will not prevent dangerous interference with the climate system unless key developing countries, such as China and India, also control emissions. Dingell and Boucher want any legislation establishing a program to limit U.S. emissions also to include incentives for developing nations to curb their emissions, particularly in the absence of an international agreement that mandates a greenhouse gas reduction for all major emitting countries. Industry Forms Working Group Environmental concerns recently have been extended to include climate change and greenhouse gas emissions, and the metalcasting industry faces a unique opportunity to study proposed legislative and regulatory developments and engage in the debate on climate change in a conscientious and strategic manner. In response, the American Foundry Society (AFS) has formed a greenhouse gas working group to lead advocacy activities and formulate a position and plan of action that best serves the metalcasting industry. Though climate change legislation presents a challenge to metalcasters across the U.S., the AFS greenhouse gas working group is preparing to offer new perspectives and proposals to address this critical issue facing our industry, our nation and the world. MC Some experts have suggested the U.S. might adopt an approach that uses trade policy as a tool. Trade-related policies that use tariffs, taxes or other mechanisms could require foreign goods to be accompanied by emissions allowances, establish performance standards such as emission standards or carbon intensity-based regulations, or impose conditions for other countries access to and participation in a climate change bill. Some trade experts are concerned that climate change legislation for developing nations would trigger a major backlash, as well as a World Trade Organization (WTO) complaint. As Dingell and Boucher continue to work on the details of their legislation, they will be deciding which combination of policy options would best encourage developing countries to limit their greenhouse gas emissions. Dingell and Boucher aim to introduce legislation in late spring, shepherd the bill to the House floor later this year, and send it to President Bush for his signature by the end of Since this is an election year, lawmakers will be eager to finish up business and may not have time to consider comprehensive climate change legislation, according to Washington insiders. Before sending a bill to the president, House and Senate lawmakers will have to reconcile two different proposals. Some environmental groups remain skeptical that Dingell, 40 MODERN CASTING / April 2008

6 U.S. manufacturers are concerned climate change legislation would hinder their ability to compete with developing countries that don t have carbon dioxide emission limits. who represents the Detroit area, and Boucher, who represents a coal producing district in southern Virginia, will develop an economy-wide capand-trade program that does not show favoritism to the auto manufacturing or coal industries. State Legislation An important part of the climate change policy landscape is the battle between the states and the federal government in deciding who has the power to regulate greenhouse gas emissions. Last year, the state of California requested a Clean Air Act waiver to implement standards to reduce vehicle greenhouse emissions by 30% between 2009 and U.S. Environmental Protection Agency administrator Steven Johnson denied California s request, drawing a barrage of criticism from California lawmakers and other states. California initiated a lawsuit in January 2008 to overturn the Bush Administration s decision. Eighteen other states have intervened in support of California s lawsuit. In the absence of decisive action from Congress, the states claim they have the ability to lead the charge in developing innovative and effective programs to limit greenhouse gas emissions. Many congressional lawmakers, however, are worried that leaving states to their own devices will lead to the development of a patchwork of conflicting and confusing individual state regulations. While this debate continues between the states and Washington, metalcasters can decide as a group to look to the future and make the inconvenient truth of climate change much less of a burden. MC For More Information Contact the AFS Washington Office at 202/ to learn about the AFS greenhouse gas working group and comment on climate change legislation. MODERN CASTING / April