To curb global warming, U.S. coal producers are adrift in choppy political seas

To curb global warming, U.S. coal producers are adrift in choppy political seas

The battle lines have been clearly drawn between the Democrats in Congress, a handful of major names in the international mining industry and the National Mining Association and its coal company members.

The Democrats’ victory in last year’s elections means Congress’s stance on environmental issues has changed dramatically. Gone is the champion of mining and big oil from the House Natural Resources Committee. Meanwhile, the mining attorney, who formerly chaired the House Subcommittee on Energy and Mining, is now Nevada’s governor.

The first woman speaker of the House, San Francisco Democrat Nancy Pelosi, has turned her attention to global warming. The good news is that the House Energy Committee Chairman Rep. John Dingell of Detroit has long opposed mandatory emissions caps.

Senate Energy Committee Chairman Jeff Bingaman, a Democrat, replaced his fellow New Mexico colleague Pete Domenici, a Republican. Unlike his colleague, Bingaman has already introduced an energy cap-and-trade scheme, aimed at slowing the growth of emissions.

Last week Republican Presidential candidate Sen. John McCain of Arizona, and Senator Joe Lieberman (D-Conn.) introduced the most ambitious cap-and-trade scheme. Their bill mandates strict CO2 and GHG emission reduction targets as well as a cap-and-trade emissions reduction credit system identical to what has been proposed in the United Nations’ Clean Development Mechanism.

The McCain/Lieberman bill would only apply to entities that emit more than 10,000 metric tons of greenhouse gases per year, and would not apply to individual car owners, homeowners, or the agricultural sector. Companies would be mandated to submit one tradable allowance for each metric ton of GHG. They will have the economic choice of reducing their emissions to reduce their required allowances, or purchasing other companies’ allowance to cover their continued emissions.

In the meantime, Senator Dianne Feinstein, another San Francisco Democrat, has proposed legislation that would cut power companies emissions by 25% of their project levels by 2020.

To compound the politic morass, evangelical Christian groups are beginning to embrace global warming as a moral issue. And, on the other side of the aisle, former Vice President Al Gore’s documentary on global warming is now up for an Oscar for best documentary. And, a number of Americans actually paid to see it in movie theaters.

President George W. Bush asserts that the U.S. dependence on fossil fuel, specifically oil, is the ”confluence of national security and economic security concerns and environmental concerns that come together and can be solved at the same time by technologies. ”¦The good news is, is that we’re on the verge of some unbelievable technological breakthroughs.”

Bush’s advocacy of U.S. energy independence is striking a resounding chord of support among his constituents. A recent poll by Public Agenda On-Line found that 51% of Americans think that government can do a lot to reduce dependence on foreign energy. Another 36% would also like to see the government become more active on this issue.

During a talk to DuPont employees this week, Bush declared ”I think it’s an appropriate use of taxpayers’ money to spend on developing new technologies to help us deal with problems that affect today and the future for your children.”

Noting that ”we’ve got a lot of coal,” the President suggested that ”the fundamental question is: Can we burn that coal to heat your homes in a way that doesn’t endanger the environment? And so we’re spending a lot of money to do that. ”¦We’re spending billions. The dream one day is for””for us to be able to say here’s a coal-fired plant that has zero emissions. And it’s possible. It’s likely, as a matter of fact.”

The world’s largest heavy equipment manufacturer has already taken on one of its biggest customers, the international mining sector, in calling for mandatory caps on greenhouse gas emissions. Caterpillar Chairman and CEO Jim Owens said this week that, ”We fully agree with the President that abundant supplies of coal will produce the majority of this country’s energy for years to come.”

”We believe a well-thought-out program can create economic opportunities while allowing flexible and expanded use of coal, clean diesel and other alternative energy,” he added. This week CAT has also joined Alcoa, DuPont and other major companies who do business with mining in supporting mandatory emissions reductions to address climate change.

Carter Roberts, President and CEO of the World Wildlife Fund, noted that during President Bush’s State of the Union address, Bush ”took a long overdue step toward acknowledging global warming as a significant threat to the nation.” Nevertheless, Roberts asserted that ”the majority of Americans, a growing number of states and an increasing number of CEOs are demand a comprehensive approach that includes a mandatory cap of emissions across sectors.”

The Congressional Budget Office released a study last September which suggested that one efficient policy response would be to reduce carbon emissions by increasing the costs of emitting carbons, both in the near term and in the future. Federal policymakers could tax fossil fuels in proportion to their carbon content, or establish a cap-and-trade program.

Meanwhile, the CBO also advocating a concurrent federal policy of increasing federal support for R&D on various technologies that could help reduce the growth rate of carbon emissions, and create spillover benefits in achieving energy efficiency.

Under a third, hybrid approach, the CBO has suggested that policymakers could set emissions caps, but also establish an upper limit on the price of allowances, referred to as a ”safety valve price.”

Regulated entities under market-based greenhouse gas (GHG) emission trading proposals now under consideration by the Senate include coal mines, petroleum refineries, natural gas processing facilities, fossil fuel importers, coal mine methane, and non-CO2 greenhouse gases. The Energy Information Administration has estimated that the U.S. will produce 8649, 9248 and 9930 million metric tons of GHG emissions in 2020, 2025, and 2030 respectively.

The National Mining Association is supporting Bush’s quest for U.S. energy security. In a news release this week, NMA President and CEO Kraig Naasz noted that ”a study last summer by the Southern States Energy Board estimates that liquefying a small portion of U.S. coal reserves could offset a significant portion of imported energy, reduce our enormous costs of protecting offshore energy sources and create high-wage jobs.”

However, Naasz was far less enthusiastic about Senator Bingaman’s carbon emissions cap-and-trade legislation, calling it a ”tax on our country’s most abundant source of energy.” Naasz claimed Bingaman’s proposal will ”cripple U.S. coal production, the nation’s economy and our efforts to ensure greater energy security.” He also accused the Energy Information Administration of vastly understating the cumulative costs of the Bingaman legislation.

The NMA advocates ”a technology-based approach to climate change that promotes voluntary efforts to reduce greenhouse gas emissions, both in the United States and abroad, and take into account the fundamental links between climate policy, energy supply, national security and economic growth,” Naasz said.

The International Emissions Trading Association and the World Bank estimate that the overall carbon market is now worth more than $21.5 billion. The Chicago Climate Exchange and the InterContinental Exchange have already developed electronic and Internet carbon and GHG reduction contracts and trading platforms. Among their members are utility companies, forest products, environmental organizations, local governments, chemical companies, electronics and semiconductor manufacturers, and retailers.

There are even future and options contracts for CO2 reduction that are stimulating new sources of trading activity. The European Emissions Trading Scheme strives to meet environmental aims through economic means through its cooperative and licensing agreement with the Chicago Climate Exchange.


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