Allowances uneven in House's cap-and-trade bill, API's Gerard says

A carbon cap-and-trade bill before the US House needs to be reworked so allowances are distributed more evenly, American Petroleum Institute President Jack N. Gerard said.

A carbon cap-and-trade bill before the US House needs to be reworked so allowances are distributed more evenly across the entire economy, American Petroleum Institute President Jack N. Gerard said on May 18.

"We keep hearing about this legislation being a market-based proposal to begin the transition to a less carbon-based society. But it's not market-based if you give allowances to some segments and not to others," he told reporters in a teleconference hours before the House Energy and Commerce Committee began marking up HR 2454, the American Clean Energy and Security Act.

Sponsors Henry A. Waxman (D-Calif.), the committee's chairman, and Edward J. Markey (D-Mass.), the chairman of its Environment and Energy Subcommittee, made several changes from their original Mar. 31 proposal before releasing the final bill on May 15. One or two responded to US oil industry concerns, Gerard acknowledged. But the measure is still badly flawed, he maintained.

"When you look at the way they distributed 85% of the allowances, some went to segments that aren't carbon bidders. We believe it should be equitable across all carbon sources. The Waxman-Markey approach isn't. Those who produce and use petroleum are receiving little and being asked to account for much," he said.

The bill's economic implications also have not been fully considered nor does it recognize that US refiners operate in a global industry, Gerard said. "There are tariff and rebate provisions in the legislation designed to offset impacts on the steel and other industries, but the refining sector is specifically excluded. There is no transition, no ability to stay competitive. There needs to be recognition of those industries which use petroleum products as well," he said.

'You look elsewhere'

"Clearly, the incentive and direction would be to push jobs overseas. If you can't succeed in a globally competitive environment because of costs in the United States, you start to look elsewhere. That means high-paying jobs would move overseas, which is what people who are leading this effort say they want to avoid," API's president added.


A few constructive changes were made the past few weeks, notably elimination of a low-carbon fuel standard provisions which would have overlapped the federal renewable fuel standard, he noted. But the bill still has problems and should not be rushed, Gerard said. Waxman remained committed to having it ready to move to the House floor by Memorial Day.

"I'm not talking about years. I'm talking about weeks. There's plenty of time to get this right. It probably will be the most significant piece of legislation that will be enacted in our lifetime. We're going to stay at the table and continue to express our views," Gerard said.

Others also warned that committee members need to consider the bill's economic implications more fully. "Climate change legislation will have a significant cost impacts on every person and business and the economic competitiveness of the country. We must get it right or we can drive the country into a deeper recession and lose more high paying manufacturing jobs," said Paul N. Cicio, president of the Industrial Energy Consumers of America.

American Gas Association President David N. Parker applauded the bill's provision which does not bring commercial or residential gas customers under the cap-and-trade system until 2016, however. "By using energy wisely and making smart choices every day, our customers have reduced their per-household consumption so dramatically that there has been virtually no growth in emissions in nearly three decades, despite a 70 percent increase in households using natural gas," he noted.

Contact Nick Snow at nicks@pennwell.com

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