The Fertilizer Institute on March 31 testified before the U.S. Senate Republican Conference and the Republican Policy Committee about the impact of proposed climate change policies on the U.S. fertilizer industry. The hearing was held by House and Senate Republicans to examine how the carbon cap-and-trade provisions included in President Obama’s budget will impact consumers and businesses.
A national cap-and-trade system would put a ceiling on greenhouse gas emissions using a fixed quota of tradable emissions credits in order to drive investments in low carbon technologies. Companies would be issued permits that have specific allowances, or caps, for emissions; those that need to increase their emission allowance would have to buy credits from other companies.
The proposal has produced heated debate on Capitol Hill. The Senate on April 1 voted 67-31 in favor of an amendment that keeps Obama’s cap-and-trade proposal out of the budget reconciliation process after supporters sought to force the measure through using rules that would have limited debate and required only a simple majority vote in the Senate.
Climate change legislation that includes a cap-and-trade system was introduced in the U.S. House of Representatives on March 31, however. The American Clean Energy and Security Act of 2009, sponsored by Reps. Ed Markey (D-Mass.) and Henry Waxman (D-Calif.), calls for reducing greenhouse gas emissions 20 percent below 2005 levels by 2020, 42 percent by 2030, and 83 percent by 2050. The bill would create a cap-and-trade system for carbon dioxide that covers any entity emitting more than 25,000 tons of CO2 per year, with few specifics on how credits would be allocated, auctioned, or purchased. Debate on the bill is expected to begin following the April recess.
TFI President Ford B. West, who testified on behalf of TFI and its member companies on March 31, said the U.S. nitrogen industry sector is particularly vulnerable to the impacts of a cap-and-trade system, and has already experienced significant declines in the past decade due primarily to the high cost of natural gas.
“Currently the industry operates 27 ammonia plants that are generally located in rural America and that house 100 to 150 jobs that average an annual salary of $70,000 each,” West said. “These are good jobs with good benefits, and the fertilizer industry has grave concerns that our remaining domestic nitrogen production facilities cannot stay operational through any transition period of a cap-and-trade system where utilities turn to natural gas as an alternative for generating electricity.”
West argued that reduced domestic nitrogen fertilizer production is counterproductive in curbing global green house gas emissions, and reduced domestic fertilizer supplies will negatively impact American farmers.
“The United States currently imports 55 percent of our nitrogen needs, and 83 percent of that nitrogen is from countries with no climate change policy in place, and a majority of these countries are also ones from whom we are striving to gain energy independence,” he said. “Reduced domestic production of fertilizer will only increase costs to farmers since they will be more exposed to price volatility and product availability resulting from importing such a great deal of our plant nutrient needs.”
West cited the findings of a study by Doane Advisory Services that was commissioned by TFI in 2008 to examine the impacts of high energy costs resulting from a cap-and-trade system introduced in last year’s Lieberman-Warner Climate Security Act of 2008, which was ultimately tabled. “Using the Lieberman-Warner bill as a baseline, the study found that total crop production costs for eight commodities would increase $6 to $12 billion,” he said.
West concluded by admonishing Congress to “tread cautiously and consider all implications and unintended consequences of proposed climate change policies, including a cap and trade system. It is essential that Congress develop a climate change policy that will preserve the fertilizer industry and many other U.S. manufacturing sectors’ ability to remain viable in a very competitive global market.”
TFI on April 2 released a climate change policy brochure, which it said was developed as a tool for use in climate change policy debates. “The climate change brochure highlights the essential contributions of the fertilizer industry to our nation’s production of food, feed, fuel and fiber, and emphasizes the fact that the industry has voluntarily taken early action to achieve energy efficiencies,” West said.
The brochure, entitled “The U.S. Fertilizer Industry and Climate Change Policy,” is the sixth in a series of briefing papers designed by TFI and its members to delineate the industry’s mission and position on certain issues of importance. TFI is making the brochure available to its members for congressional visits, as well as for use at meetings with state legislatures, local councils, and others.
Specifically, the brochure highlights that fertilizer is a global strategic commodity; that the fertilizer industry is both an energy intensive and an energy efficient industry; and that any new U.S. climate change policy must deliver environmental progress without harming the economy or U.S. food production.
“When we define one strong industry message and speak with one voice, our advocacy efforts are much stronger,” West said. “The more our members engage with their elected officials, the more times our industry’s message is being heard.”
TFI has also developed an informational brochure that illustrates operational U.S. fertilizer production facilities for nitrogen, phosphorus, and potash. The climate change policy brochure and U.S. fertilizer production maps can be viewed on TFI’s Web site at www.tfi.org.