When is being Green not enough?

One of the latest twists in the development of U.S. cap & trade
regulations is the concern that stringent rules and costs could
drive energy-intensive manufacturing overseas to less regulated
countries. There is even a term for this potential loss of jobs:
leakage.

The concern over leakage recently prompted a group known as the
Energy-Intensive Manufacturers’ Working
Group to
testisfy before Congress to seek protective measures. The group
is composed of manufacturers in industries such as steel, aluminum,
glass, chemicals and papers, and includes participation from Alcoa,
Corning, Dow, and PPG. According to
testimony from their spokesperson Jack McMackin, an attorney
and director with a manufacturer of glass containers (Owens
Illinois), the group is focusing on remedies that would
mitigate the high costs of compliance, rather than
equalize high costs versus less regulated countries via
tariffs. McMackin testified that the group sees a bill introduced
by Congressmen Inslee and Doyle (Inslee-Doyle)
“as the core of a workable solution,” that could form the right
type of “transitional relief” energy intensive industries need to
guard against job leakage.

As McMackin points out, energy intensive industries already have an
economic incentive to be green, simply because energy represents a
significant portion of their costs. Indeed,
companies such as Dow have made documented progress on reducing
their energy intensity (energy used for a given measure of output)
over the past decade, with Dow committed to reducing energy
intensity by 2.5 percent annually through 2015.

What we are seeing is a lobbying process in which industry is
concerned that despite sincere efforts to be green, the cost of
compliance with new U.S. regulations could force some U.S.-based
plants to close. Of course, the Obama Administration, Congress, and
regulators have the larger public interest to keep in mind. Sure,
they don’t want to force jobs overseas, but if compliance costs and
regulations are watered down too far, there will not be enough
incentive to nudge industry toward cleaner technologies such as
coal gasification or biomass as sources for energy generation. In
my view, each side has its interests to attend to. Industry groups
certainly have the right to point out that some compromises might
be needed to guard against leakage, and government needs to put
some teeth into regulations.

More simply, for those of us involved with U.S. manufacturing, it’s
important to stay on top of the development of cap & trade
regulations, while at the same time, push the use of green
technology as a cost saver. The fact that groups such as the
Energy-Intensive Manufacturers’ Working
Group have formed and are testifying
before Congress indicates that industry expects a climate bill with
some form of cap & trade regulation.