Cap and Trade Under Pressure as Republicans Win in Massachusetts

photo : Cleveland.com

The recent victory of Scott Brown in the recent US Senate by-election in Massachusetts is likely to put further pressure on the proposed Cap and Trade legisation.

The new senator actively campaigned against the legislation and his election reduces the Democrat majority in the Senate, making such bills harder to pass.

The election is significant. Brown highlighted two main issues in his campaign - the proposed healthcare reforms and cap and trade. His victory reflects the increasing concern voiced by the US chemical industry regarding the likely impact of cap and trade on industry and jobs.

It is being suggested that the bill could be watered down to focus on renewable energy alone. This blog has long promoted a sustainability agenda and agrees that increased use of renewables should be one element of this approach. There should also be a strong focus on new technologies to reduce energy consumption and waste. The chemical industry should be aiming for efficiency on a global basis. Regional schemes, such as cap and trade in its current form, are not the solution.

Carbon Trading Hitting Europe's Chemical Industry?

As the forthcoming Copenhagen Climate Summit in December gets
nearer, concerns are being voiced regarding the potential impact of the next phase of the EU Emissions Trading Scheme.

The UK Times newspaper has expressed serious concerns that the level of regulation in Europe is increasingly forcing companies to relocate in regions with less stringent regulation.

The European Commission has reacted to this threat of 'carbon leakage' by giving some exemptions to the compulsory purchase of carbon credits when the next phase of the Emissions Trading Scheme comes into force. The credits will be based on benchmarks for each industrial sub-sector. The principle is that the most efficient are rewarded, whilst the less efficient have an incentive to invest and improve.

The principle is laudable, but in a global marketplace, it can only work in practice if all regions of the world adopt the same standards. If not, the effect can only be to speed up the migration of refining and chemical industries to other regions outside of Europe.

Higher feedstock and labour costs are already making things difficult for European manufacturers. Whilst there is no doubt that a drive to reduce emissions is necessary, a solution has to be found to ensure that regulation affects all regions equally.