Cap and trade front and center in Kerry-Boxer legislation
Majority of respondents in LM reader survey indicate cap and trade will result in higher logistics costs and will potentially push production to countries with fewer restrictions.
By Jeff Berman, Group News Editor -- Logistics Management, 11/1/2009
WASHINGTON — Legislation introduced late last month by Senators Barbara Boxer (D-Calif.) and John Kerry (D-Mass) may have a major impact on freight transportation and logistics issues.
The goal of the Boxer-Kerry legislation is to reduce carbon dioxide emissions by 20 percent from 2005 levels—a number that represents a three percent increase from the House version of this bill that was passed in June. Both the House and Senate versions of the bill seek an 83 percent reduction in CO2 emissions by 2050.
A major component of both versions of this legislation that has been met with heavy opposition has to do with “cap and trade,” a form of emissions trading used to control pollution by offering economic incentives in order to achieve reductions in emissions pollutants. Cap and trade would put limits on emissions from motor vehicles, coal-fired plants, and factories.
The argument against cap and trade was made clear in a recent Logistics Management (LM) reader survey poll of 115 logistics and transportation executives that found 90 percent of respondents opposing the bill and 92 percent indicating it will increase costs to varying degrees (See pie chart).
But Kerry and Boxer maintain that these higher emission reduction targets impact “less than two percent of American businesses and keeps American industry competitive during the transition to a new energy economy.”
Meanwhile, survey respondents who say they’re against cap and trade cite a long list of reasons for their opposition, including the lack of details on how the process works, the need for more scientific evidence to support human caused climate change, the extra costs to the supply chain, and the potential shift of production to countries with fewer restrictions, among other factors.
While in the minority, those respondents that favored cap and trade noted there are various long-term benefits, including taking steps to reduce U.S. dependence on oil coupled with economic incentives to cut CO2 emissions.
“It’s the right thing to do for the planet,” said an automotive shipper. “Sustainable energy investment and growth is the newest economic and societal evolution. Cap and trade can be an area for the U.S. to gain a competitive edge in being a supplier of a portion of the world’s energy needs.”
This sentiment is shared by James Corless, director of Transportation for America, a coalition of national, state, and local organizations calling for the renewal of a national transportation program for the 21st century. “This bill makes significant advances in addressing the impact of transportation on our climate,” said Corless, adding that transportation contributes nearly one-third of the total annual CO2 emissions in the U.S. and will generate a significant portion of the revenues in the bill.
But as revealed by the LM survey, the bill is vehemently opposed by shipper-based organizations, including the U.S. Chamber of Commerce and the National Association of Manufacturers.
Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, said his organization opposes the bill because it’s neither comprehensive nor international, and it falls short on moving renewable and alternative energy technologies into the marketplace and enabling the transition to a lower carbon future. Donohue added that the bill would also impose carbon tariffs on goods imported into the U.S., which could spur retaliation from global trading partners.
If this bill is eventually signed into law there is going to be a need for shippers to account for their carbon footprint, according to Ben Gordon, managing director of BG Strategic Advisors, a strategy-led investment banking firm for the supply chain and logistics sector.
“There are all kinds of unintended consequences that are going to flow from this, and [large] shippers are going to have huge costs and reporting obligations associated with this,” said Gordon. “Reporting costs will also be passed on to them, as well as having to report what is my carbon footprint and what is my liability and how do I quantify it and how do I reduce it? That’s going to be a big deal.”
Gordon explained that cap and trade is going to ultimately put a huge tax on transportation because it’s going to make fuel more expensive. The reason, he said, is it’s not just anything that generates pollution, it’s anything that generates carbon.
The legislation will now move to the Senate Environment and Public Works Committee for consideration.
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