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Cap And Trade Could Lead To Major Job Loss

By Staff | Dec 2, 2009

While news out of Washington largely centers on the debate over health care reform, another issue-climate change-is heating up discussion. In Senator Jeffrey Kessler’s opinion, it is critical that West Virginia Senators oppose the Waxman-Markey cap-and-trade climate legislation that passed the House earlier this year and awaits action in the U.S. Senate in the form of the Kerry-Boxer bill.

Before delving into this proposed bill and it’s lasting effects on West Virginia, first it may be useful to further understand what cap-and-trade climate legislation is. By the Conservation Law Foundation’s definition, cap and trade is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. Central authority, such as a governmental body, sets a limit-or cap-on the amount of a pollutant that can be emitted. Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed.

The U.S. Senate Committee on Environment and Public Works believes the Kerry-Boxer bill will undermine the global competitiveness of America’s manufacturers and give a huge competitive advantage to countries such as China and India. Furthermore, they believe it will weaken America’s national security through a weakened U.S. economy, compromising the ability to protect the country against foreign threats.

Other threats particularly posed on West Virginia’s economy include loss of jobs, higher prices for electricity, increased taxes, and unfair advantages to international refineries. Senator Kessler, along with Karen Price, president of the West Virginia Manufacturers Association, and Neil Stanton, vice president of refining at Ergon-West Virginia, Inc., are three professionals in their respective fields who have come together to speak out against the Kerry-Boxer bill, which the Senate has planned to take action on before the end of the year.

“The Kerry-Boxer bill will be detrimental to West Virginia’s economy, costing West Virginia jobs by the thousands, not to mention the costs that would be borne by each and every family,” says Senator Kessler. “West Virginia simply cannot afford this stealth tax increase.” Kessler believes the bill needs to be monitored very closely and reworked to allow the necessary time for West Virginia to meet the requirements set forth in the bill.

Neil Stanton adds, “Our challenge is to be given a time frame to invest economic incentives in clean energy technology. The time tables under the current economic climate would be devastating. We would like the time lines to be elongated for compliance and to ensure proper money and time is being put into the guidelines.”

“They need to give us an opportunity to be a part of the solution for the energy needs and not hog-tie us so we can’t realistically make both the state and the nation prosper,” laments Kessler. Regarding regional jobs, the National Association of Manufacturers (NAM) conducted a study that found West Virginia could lose up to 11,000 jobs primarily due to lower industrial output thanks to higher energy prices, the cost of compliance with emissions cites and greater competition overseas. The study concluded that these continued losses will have a lasting effect on the economic base of West Virginia.

As Karen Price puts it, the bill will be a death blow for West Virginia because it only applies to the United States. “Our region is at a competitive disadvantage against brick countries,” adds Senator Kessler. “Our competitors would not be burdened like us. It would be a disadvantage to our industries. The bill needs to be applied internationally so that our industries aren’t burdened as heavily.” Kessler continues to say that although we are all sensitive to the environment, we can’t have two sets of rules. “There will be zero effect on overall global warming if the U.S. is restricted but other countries are not. We need a worldwide consensus with realistic time lines and appropriate incentives that won’t cripple our industries.” Stanton agrees, “The science of climate change is not an exact science. There are credible sources on each side. Our emission reduction will not offset the international emission rate.”Another big issue surrounding emission reductions is the use of alternative renewable energy sources. “In regard to renewable energy such as solar and wind energy, those prices are marginally economical but in our region it’s just not favorable,” says Stanton. Kessler adds that in the next 20-30 years, there will be no other viable alternative other than coal. “Energy demands will increase and additional demands on the world for energy will increase. Taking coal out of the mix is a fairy tale,” Kessler says. “We need to continue to encourage coal implementation. Any national energy policy includes coal and clean coal technological enhancements.” Stanton says the only alternative power source right now is nuclear energy, however it’s extremely expensive and takes a lot of time. “There’s also an understandable mentality that people don’t want nuclear power plants in their backyards,” adds Stanton.

There are two types of emissions that fall under cap and trade legislation: the emissions from the stacks and the emissions from the end product. Stanton laments, “In the petroleum industry, we are burning so much more than other industries. We are responsible for 15 percent of stack emissions and 85 percent of the fuel sold and burned by vehicles. As the cost of carbon credits goes up, so does the cost to the consumers for the heavy dependency for the power and transportation fuel.” Less than five percent of petroleum emissions would be covered by credits. Stanton speculates that the petroleum industry is being heavily targeted. He believes the majority of the funding and burden from this legislation will fall under this industry.

Senator Kessler adds that he believes cap and trade also sets up a huge bureaucracy to handle the money as it changes hands, that there will have to a brokering organization. “It takes away from certain industries. It’s picking winners and losers in our nation’s economy instead of letting the free market decide.” According to the senator, much of it goes to foreign aid and foreign employment training and placement. “We anticipate significant job loss. And it’s a bad deal for any time, but especially in this recession.”

In conclusion, there’s time left for West Virginia Senators to consider the Kerry-Boxer bill. While Kessler, Price, and Stanton agree that the bill has good intentions, it’s simply not ready to be law. Not fairly, anyhow. Karen Price adds that there haven’t been hearings on this legislation at all. “We need to hear and talk about it. There’s too much to comprehend and if we just broke it down into sections, we could see more clearly and discuss the best solution.” Senator Kessler stresses, “We expect something will pass, but we need to insist that what passes is appropriate and reasonable. We should prevent the EPA from taking authority outside of the agreements. In the current Senate bill, it doesn’t do so.”

The Senate plans to hear the Kerry-Boxer bill before the end of the year. Kessler, Stanton, and Price have given their professional opinions and suggestions regarding the legislation and hope readers and U.S. Senators take head. Further information on cap and trade legislation is available online to hear other sides of this issue. The public is encouraged to get informed and active in this important legislation affecting the region.