Contemplating Cap and Trade

Contemplating Cap and Trade

April 27, 2009

There are significant developments underway in the “Greenhouse Gas” arena. None of which are good news for the fertilizer industry, or for that matter, those of us who have gotten into the habit of regularly eating three meals a day.

Even before the inauguration, Obama's Carbon Busters were hard at work launching a major CO2 offensive. The world’s economic collapse delayed their efforts for a few months, but just as the economy seemed to be finding its feet, the Carbon Busters are now back, with a vengeance.

The offensive is two pronged. In early April, Congressman Waxman tabled a discussion draft of the “American Clean Energy and Security Act of 2009”. Quickly renamed “Waxman-Markey”, this 648 page tome is packed full of nefarious surprises for industry in all forms. The opposition to this legislation has been widespread and aggressive.

Anticipating this opposition, the administration launched an attack on a second front in mid April with the EPA declaring that greenhouse gases are a public threat.

In a speech before The House Energy and Commerce Committee, Congresswoman Marsha Blackburn summarized the “threat” as follows: “Mr. Chairman, last week the EPA positioned itself to regulate carbon dioxide emissions under the Clean Air Act, with or without Congressional consent. We are then, faced with a choice, we can acquiesce to bad regulation that will have certain and disastrous impacts on our economy or we can legislate an even more harmful system. It is as though, when faced with a gun to our heads, Congress is opting to shoot ourselves in the chest.”

The political debate continues. In testimony before the same committee former Vice President Al Gore testified that the legislation was “one of the most important pieces of legislation ever introduced in Congress". Robert Michaels, an economist with The Cato Institute, declared in testimony that Waxman-Markey is: “The most profoundly anti-consumer legislation ever brought before a Congress.” Former House Speaker Newt Gingrich characterized Waxman-Markey as "environmental extremism." And the beat goes on…

As this political drama has played out The Fertilizer Institute and others have been lobbying furiously trying to stay ahead of the curve. The stakes are high. Our friends in the Euro zone are facing Cap and Trade costs of USD 30 per MT in competition with imported product which for the most part does not bear a similar burden. U.S. nitrogen producers would additionally be facing the threat of rising natural gas feed stock costs as other industrial companies and utilities switch to gas from coal and oil to minimize their own CO2 exposure.

Our closing message to our friends in Washington...Don’t drink the Kool-Aid.