With the Environmental Protection Agency’s ruling late last week that greenhouse gases are a danger to public health and welfare, the prospect that Congress will pass a climate policy bill in 2009 rose sharply.
The April 17 ruling requires the EPA to move to reduce the emissions—unless Congress acts first. Many industrial lobbies and regional interests want to be heard on the subject and they expect to have greater influence in the legislative process than in an EPA regulation.
Many interests consider it urgent to get involved in shaping policy because the impacts of emissions control will be uneven, affecting some industries and some parts of the country more severely than others. The world is creating rising emissions of CO2, the most prevalent of the greenhouse gases, to generate energy. Some industries use much more energy than others and some sources of energy release much more CO2 per unit of energy than others.
Energy costs are a minor factor, less than 2 percent of total costs, for most American manufacturing industries. But there are important exceptions—notably oil refining, steel production, and paper and printing. For these energy-intensive industries, production costs go up roughly 1 percent to 2.5 percent for every $10 increment in the price of CO2. That price is currently zero in the United States, but would presumably rise under any policy to reduce emissions. For an analysis of the various impacts on industry, see “Competitiveness Impacts of Carbon Dioxide Pricing Policies on Manufacturing,” by Mun S. Ho and others, RFF Discussion Paper 08-37, November 2008.
The Midwest is far more dependent on coal than any other part of the United States and coal produces more CO2 than other sources in relation to the energy it provides. Since the price of CO2 is likely to be passed through to the consumers of energy, it will mean a greater increase in electricity bills in the Midwest than elsewhere in the country. New England depends more heavily on nuclear reactors and the Far West has substantial hydroelectric power, neither of which produces any CO2. The South gets more energy from natural gas than from coal, and gas emits less CO2 per unit of energy than coal does. These disparities have not been lost on the Midwestern states’ delegations to Congress.
For further discussion of regional differences, see “The Incidence of U.S. Climate Policy: Where You Stand Depends on Where You Sit,” by Dallas Burtraw, Rich Sweeney and Margaret Walls, RFF Discussion Paper 08-28, Spetember 2008.
