Oil Refiners and Farmers Lobby for Climate Change Concessions

by | Jul 10, 2009

It’s a tough road ahead for the U.S. climate bill in the Senate. So far, oil refiners and farmers as well as a leading trade group are expressing their dissatisfaction with the climate legislation recently passed by the House of Representatives.

Major oil company Royal Dutch Shell is urging the U.S. Senate to give oil refiners a bigger share of free pollution permits under a cap-and-trade plan to fight global warming than the House of Representatives provided in its climate change legislation, reports Reuters. The Senate is currently drafting its version of the climate change bill.

The oil sector says it was short-changed by only receiving 2 percent of the allowances (or pollution permits) compared to other big carbon dioxide emitters, like electric utilities, which were given 30 percent of the permits, according to Reuters.

Under the House bill, about 85 percent of the pollution permits would be given out free to impacted industries and about 15 percent would be sold, reports Reuters.

Reports about passage of the bill don’t sound good, with President Obama’s initial plan to auction 100 percent of CO2 emission permits from the cap-and-trade plan barely passing Congress with 15 percent of the credits for auctioning, reports BNET Energy.

Although there are a number of industries looking for concessions, the one causing the most anxiety with the bill’s Democratic sponsors is the Agriculture Committee, which aims to protect the powerful farming lobby, primarily big companies like Archer Daniels Midland and Cargill, reports BNET Energy.

The head of the Ag Committee, Tom Harkin, said he intends to use the House version of the bill as a baseline for chipping away further at the bill so new concessions will probably protect the farming industry from having to make significant changes for quite some time, according BNET Energy.

Agriculture Secretary Tom Vilsack said the climate change bill being drafted in the U.S. Senate is unlikely to succeed unless it gives farmers and ranchers a role in locking carbon into the land, reports Reuters.

Vilsack said in the article that U.S. farm and forest land absorbs more carbon than emitted by agricultural operations, and a successful U.S. carbon-offset program would show the world how agriculture can help control emissions. However, agriculture and deforestation are said to be a major source of emissions in developing countries.

Critics say climate legislation will lead to sharply higher fuel prices, and several large U.S. farm groups opposed the House bill on grounds it will hurt farm income, reports Reuters. The National Pork Producers Council told the news agency that energy and other input costs could rise by more than 20 percent, and the National Cattlemen’s Beef Association said farm income would drop by $8 billion to $50 billion over the long term.

On top of these highly influential industries gunning for concessions, the National Foreign Trade Council warns that a provision in the House-passed climate bill could violate world-trade rules by favoring U.S. auto makers in the distribution of more than $2 billion in government subsidies to build plug-in electric vehicles, reports the Wall Street Journal.

Bill Reinsch, president of the Washington-based National Foreign Trade Council, told WSJ that the electric-vehicle program likely violates World Trade Organization rules that prohibit countries from favoring domestic companies.

Michael Stanton, president of the Association of International Automobile Manufacturers, also said in the WSJ article that the program appears biased against foreign-based auto makers.

However, Alan Reuther, the UAW’s chief lobbyist, said the union supported the provision as a way to ensure government money is being used to create jobs in the U.S. He told the WSJ: There is “no reason Toyota can’t produce the Prius in this country.

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