The Climate Bill is Dead (Sort of) What Next For the Metals Industries?

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The “climate bill the one with cap and trade provisions covering electric utilities is dead in the water, according to one lobbyist MetalMiner spoke to. However, the bill could get resurrected during the lame duck session. The bill failed to garner the necessary 60 votes to prevent a Republican filibuster. Instead, Democratic leaders will focus on modest tweaks to US energy policy to include oil spill provisions, energy efficiency upgrades and “incentives for the conversion of trucking fleet to natural gas and the Land and Water Conservation Fund, according to So what to make of this development?

Some, like NY Times columnist Thomas Friedman claim, “we will be sorry for not passing this legislation. Friedman goes on to say, “When I first heard on Thursday that Senate Democrats were abandoning the effort to pass an energy/climate bill that would begin to cap greenhouse gases that cause global warming and promote renewable energy that could diminish our addiction to oil, I remembered something that Joe Romm, the blogger, once said: The best thing about improvements in health care is that all the climate-change deniers are now going to live long enough to see how wrong they were. Now whether or not you are a supporter of climate change legislation or not, we thought MetalMiner readers might find it useful to put in context some important facts about how much energy a typical American consumes and where it comes from. According to Storm Technologies a company that provides engineering and technology solutions to electric utility generating companies, in a recent report, energy consumption on a per capital basis breaks down as follows: (300 million Americans used 101.605 quadrillion Btu’s in 2007)

  • Each US Resident uses an equivalent of 14 tons of Coal
  • Each US Resident uses an equivalent 64.5 barrels of Gasoline
  • Each US Resident uses an equivalent of 58 barrels of Diesel fuel
  • Each US Resident uses an equivalent of 52 barrels of #6 Oil
  • Each US Resident uses an equivalent of 105 barrels of Ethanol
  • Each US Resident uses an equivalent of 778 pounds of Propane
  • Each US Resident uses an equivalent of 325,000 cubic feet of Natural Gas
  • Each US Resident uses an equivalent of a (one) 75’x75′ Solar Panel

A few more facts are worthy of review, also provided by Storm Technologies:

US Energy currently comes from:

  • Coal 23.48%
  • Natural Gas 19.82%
  • Crude Oil 10.8%
  • NGPL 2.80%

These four sources, all “fossil fuels make up 56.50% of total energy production for the US.

Now a few more points:

  • Nuclear makes up an additional 8.41%
  • Renewable energy makes up 6.8% (and we’d like to clarify that the bulk of that 6.8% does not come from wind and solar, it comes from old hydro electric dams such as the Alcoa (yes, you read that right a metals company supplies a big chunk of what can be classified as renewable energy) and Progress Energy dams.

All of these data points mean that the US produces (these are not imports) 71.70% of its total energy needs. The balance of what we need comes in the form of imports, primarily petroleum (that’s the part that Thomas Friedman is after).

To date, the bill the House passed on cap and trade and the bill that just failed in the Senate focuses on the 71.70% of what we produce already. There aren’t and weren’t any provisions to move us away from imports (which we rely upon). So let’s think this through – when you cap electricity emissions from domestic sources what you save in the form of carbon emissions must in reality shift toward “other sources. (It’s not like the cap and trade legislation actually imposed limits on energy usage)

Those other sources are potentially alternative fuel sources (but again, look at the numbers on where we get energy today) they also obviously include imports. In short, we can’t see how climate legislation focused on limiting emissions (which is what cap and trade will do, remember the British were burning books this past winter because of these renewable energy regulatory mandates and subsequent power shortages), will reduce our dependence on foreign sources. In fact, we could assume the cost of energy would increase, thereby further opening up alternative sources of supply to fill the gap (e.g. imports).

How does this all relate to the metals industry you may ask? Metals producers that rely on electricity (which last time I checked, they all do) would have found themselves in a serious international competitive disadvantage. Moreover, every manufacturer buying metal would also be subject to cost increases. In a follow-up post, we’ll examine how energy is consumed and the role of energy, specifically electricity in the metals industry from an overall cost perspective.

–Lisa Reisman

Postscript: Did you know that the US steel industry has ALREADY EXCEEDED VOLUNTARILY Kyoto’s greenhouse gas targets by more than 300%? (Source: Nucor Steel)

Comments (5)

  1. Roger A. P. Fielding says:

    Regarding how energy is used in the US Metals Industry
    In 2009, 1.8 million tonnes of aluminum scrap was shipped overseas. Aluminum scrap requires just 5% or the electrical energy required to produce prime aluminum. Much was shipped in containers returned freight pre-paid by US retail customers!
    Surveys of US aluminum semi-fabricators will show little attention is paid to energy efficiency. The capital cost of the equipment and the unit cost of energy are deciding factors in selection of process equipment. Energy efficiency does not feature large in the decision making process. Really? Yes!

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