WASHINGTON The American Clean Energy and Security Act (ACES) bill passed out of the House Energy and Commerce Committee, keeping to the stringent time-frame that co-author and committee chairman Rep. Henry Waxman (D., Calif.) stressed was necessary—and its progress is a worrisome development for steel.
Many steel industry executives believe more analysis is needed before the climate-change bill becomes law, and they are now looking to the Senate to address many of the issues absent from the House version.
Concerns raised by industry executives with ACES as written revolve around proper border adjustments to maintain international competitiveness, particularly if a global standard isn't enacted, and a larger pool of free rebates—or allocations—as steel works to harness technology to reduce carbon emissions. Under the ACES bill, energy-intensive industries would receive 15 percent of the free allowances beginning in 2014 and would continue to receive allowances that will be phased out after 2025.
"While we are not advocating a continuation of the status quo, America needs an energy policy that for the next 30 years includes coal and other forms of energy, especially nuclear," said Thomas Danjczek, president of the Steel Manufacturers Association. "Doubling of energy prices via a massive tax is poor policy. The bill is seriously flawed. Let's hope the U.S. Senate can do better."
Although Waxman worked hard to ensure that energy-intensive industries aren't unduly stressed, many believe the bill does not go far enough even with his provisional checks in place. ACES includes a provision that says the President will determine if energy-intensive industries require border adjustments or a longer phase-out of free rebates in 2025.
The steel industry has argued that the border adjustments should begin as soon as the emissions cap is implemented, and says the phase-out of rebates begins too soon. There is not enough time to put low-carbon technologies in place, particularly since the technology is years away from commercial availability, the industry contends.
The ACES bill now will be examined by up to eight different House committees Agriculture, Education and Labor, Financial Services, Foreign Affairs, Natural Resources, Science and Technology, Transportation and Infrastructure, and Ways and Means. More tweaks or adjustments will be made by various committees, but not likely enough to pass muster with steel.
House Speaker Rep. Nancy Pelosi (D., Calif.) has asked the committees to work together to finalize the comprehensive energy bill and move it to the House floor for a vote, possibly by the end of the summer.
The Obama administration has been pushing Congress to pass a comprehensive bill before the global climate talks in December in Copenhagen, in part to establish the United States as a leader in climate change.
While many industry sources believe the House will pass a climate-change bill this year, they question what will happen in the Senate. "There is no reason at the moment to think that would happen in 2009—it just isn't on the to-do list; it's not even on the want-to-do list," said an industry source, who believes that the bill will stall in the Senate.
The larger debate surrounding ACES is what it will actually cost. Although previous climate change bills were fully analyzed, ACES, in its current form, has not undergone the same level of scrutiny House Republicans and steel executives argue.
Thomas J. Gibson, president and chief executive officer of the American Iron and Steel Institute, said that the AISI is currently analyzing the latest version of the ACES draft, but stressed that there are many variables that could dramatically alter cost.
"Climate policy will remain at the top of AISI's agenda for the next five years and beyond," AISI vice president Nancy Gravatt said. Steel plays an important role in the power grid and strengthening the transportation and infrastructure systems and should be part of the green solution, she said, noting the exemplary record of emissions reductions achieved by the industry on a voluntary basis.
"We will work with Congress toward balanced policy that ensures competitiveness while supporting a continued decline in carbon emissions, which is a common goal," Gravatt said.
Although many involved in energy-intensive industries stress more analysis is needed, a few groups stand to win under the ACES bill as written. One of these is coal, which would receive 2 percent of the free allowances for investments in carbon capture and sequestration technology from 2014 to 2017 and 5 percent of the allowances beginning in 2018. Other investments in renewable energy will account for 10 percent of the free allowances from 2012 to 2015.
Sen. Barbara Boxer (D., Calif.) has said that she would look at the House version of the climate bill as a guide and would begin a Senate climate bill when legislation had passed in the House. If House leaders keep to the timetable they have set, the Senate could begin climate-change discussions by late summer.