Manufacturing Resources & Tools

U.S. Energy Legislation and Your Business
Manufacturing Resources & Tools

Because industry accounts for one-third of America's energy consumption, manufacturers have a lot at stake as Washington balances environmental and economic interests. These energy initiatives could impact the way you do business.

By John Mulligan

Energy policy has been the subject of much scrutiny this year both inside and outside of Washington, D.C. That scrutiny should continue to increase over the coming months as climate change and dependence on foreign oil become hot-button issues during the 2008 election. For manufacturers looking to follow the energy debate, two pending pieces of legislation could change how your business uses energy.

America's Climate Security Act
On Oct. 18, Sen. Joseph Lieberman, I-Conn., and Sen. John Warner, R-Va., introduced America's Climate Security Act (S. 2191). The bill is intended to reduce greenhouse gas emissions in the United States by capping the amount of emissions that companies, including most manufacturers, are allowed. "If we fail to start substantially reducing greenhouse gas emissions in the next couple of years, we risk bequeathing a diminished world to our grandchildren," Lieberman said in a release. Target emissions levels in the bill include:

  • Emissions reduced to 2005 levels by 2012
  • Emissions reduced to 19 percent below 2005 levels by 2020
  • Emissions reduced to 63 percent below 2005 levels by 2050

The bill attempts to mitigate the cost of compliance by allowing companies to save, trade and borrow emissions allowances. It also includes provisions to auction off emissions credits that were set aside. The resulting funds would be used to deploy advanced emission-reducing technologies and policies, and to limit the impact of higher energy costs on low-and middle-income Americans.

Despite these attempts to control the cost of compliance, manufacturers still have reason to worry about how this bill might impact their bottom line. Keith McCoy, vice president of Energy & Resources Policy with the National Association of Manufacturers, says the bill's proposed targets for emissions reductions are unrealistic. "The timetables don't allow for normal business cycles, technology advancements or capital planning," he says.

In addition to meeting the proposed reductions in emissions standards, McCoy says the bill would affect manufacturers by having a direct impact on the cost of energy. "This could create a fuel-switching scenario, as utilities and others switch to natural gas, constraining supply and increasing cost," he says.

Paul Cicio, president of the Industrial Energy Consumers of America, agrees. "The total economic costs to the economy are staggering," he says.

Whether America's Climate Security Act becomes a law in its current form is far from certain, but given the nation's present concern about climate change, manufacturers should expect emissions caps to continue to come up in energy debates, and plan accordingly.

Energy Bill
The second piece of energy legislation that manufacturers need to know about is the pending energy bill. Both the House and Senate produced separate energy bills this summer, and as of press time, the two bills had not yet been reconciled.

The renewable portfolio standard is one of the key provisions in the House bill. The standard would require utilities to make renewable energy 15 percent of their portfolio. The goal is to reduce dependence on fluctuating oil prices and to promote cleaner fuels.

McCoy expressed concern that the flipside to energy independence could be higher energy prices, especially in areas of the country where wind power is less readily available.

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