Eyjafjallajokull, Carbon and the Latest Carbon Cap and Tax Legislation

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Ferrous Metals, Green, Macroeconomics

For those of you finding yourself enthralled by Mother Earth’s latest hiccup, Eyjafjallajokull (and boy am I glad this is a blog post and not an on-air news summary in which I had to pronounce that), we thought we’d share some interesting facts we have stumbled upon during this past week, specifically around the carbon content coming from this volcano, a subject ironically rather under-reported. My favorite factoid came from a report by AFP, the worldwide news agency, “Iceland’s Eyjafjoell volcano is emitting between 150,000 and 300,000 tonnes of carbon dioxide (CO2) per day, a figure placing it in the same emissions league as a small-to-medium European economy, experts said on Monday. The article goes on to say that this one volcano’s carbon emissions would place it in between the 47th– 75th world table of emitters (carbon emitters) by country. As the 47th largest emitter, Eyjafjallajokull would spew more carbon than any of these countries: “Austria, Belarus, Portugal, Ireland, Finland, Bulgaria, Sweden, Denmark and Switzerland, according to the article.

Planet Gore, a blog from the National Review Online website uses instead metrics from the state of Michigan to point out the irony of its state’s C02 reduction strategies, “The good news? Well, if you believe that global warming is the “predominant moral threat of this century, Michigan has cut its CO2 emissions 10 percent since its peak (197 MMT in 1996) thanks to its decade-long recession. If you believe a volcanic eruption of poverty is a greater threat, you might have a different perspective. Though a cynical statement, we can’t help but wonder about the impact the newly revised carbon cap and tax legislation would have on US industry.

Three senators had attempted to re-introduce a bi-partisan carbon bill that would, “apply different carbon controls to individual sectors of the economy instead of setting a national target, according to a Washington Post article. The primary sectors include utilities, industry and transportation. According to the Post article, the bill would have placed a cap on emissions from power plants, fuel (as in gas) would be subject to a tax and industry would eventually face a cap on emissions. But as in many American political debates, the triumvirate in this case, (Senators Lieberman, Kerry and Graham) fell apart as Senator Lindsay Graham, one of the bill’s sponsors, said he would not support any energy bill if the Senate instead decided to tackle immigration reform.

In this case, the end does justify the means – higher taxes and costs both to business and end consumers would not help the economy. And if we want a glimpse of what this type of legislation does to industry, just take a look at what Eurofer (European Confederation of Iron and Steel Industries) recently said, “We have now reached a decisive point as to whether steel production has a future in Europe, warns Gordon Moffat, director general of Eurofer. “If steelmaking is forced to migrate from Europe, others will follow in its stream, such as huge parts of the automotive and machinery sectors, leading to a massive loss in European jobs and expertise. Keeping industrial activity in Europe is essential not only in itself but also for all the business services that industry requires, from R&D to logistics and marketing, which would also be de-located with our industry.

Moffat cited three policies impacting European steel production securing competitively priced raw material, protectionism and “poorly implemented climate policy.

–Lisa Reisman

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