Cap-and-Trade Would Be Costly for Trucking, ATA Official Windsor Warns at Hearing

This story appears in the Nov. 2 print edition of Transport Topics.

WASHINGTON — A cap-and-trade climate bill would dramatically increase the cost of diesel fuel by as much as 88 cents a gallon, an American Trucking Associations official told a Senate committee last week.

Barbara Windsor, ATA’s first vice chairwoman, said an economywide cap-and-trade system would require refineries to buy carbon allowances, and “the costs associated with obtaining these carbon allowances will be passed on to the fuel consumers in the form of higher prices.”

Windsor told the Senate Environment and Public Works committee on Oct. 29 that “a major petroleum supplier to the trucking industry has advised that diesel fuel costs could rise by up to 88 cents.”

Testifying on behalf of ATA, Windsor also said the cap-and-trade legislation the committee is considering would not significantly reduce carbon emissions from trucking because carriers cannot decide to avoid buying fuel.

“Cap-and-trade will not only increase the price of diesel fuel, it also will increase the volatility of diesel prices, as a fluctuating carbon price is added to an already volatile fuel price,” Windsor said. “Volatile fuel prices make it very difficult for trucking companies to accurately predict their future expenses as they sign freight delivery contracts.”

Windsor’s concern over fuel increases was echoed by the head of the nation’s fourth-largest petroleum refiner, who told the committee that compliance with proposed cap-and-trade legislation could cost U.S. oil companies and consumers as much as $67 billion a year.

“The implications of this legislation are devastating for the American people and the American refining and petrochemical industries,” Bill Klesse, chairman and CEO of Valero Energy Corp., told the same committee in a hearing a day earlier, on Oct. 28.

Klesse said the bill, which would limit carbon emissions of mostly large stationary sources such as electrical power plants and oil refineries, would drive domestic gasoline and diesel production offshore, resulting in a loss of American jobs, and will “impose huge costs” on U.S. energy consumers.

However, Democrats, while agreeing fuel prices would rise, said the increases would be less dramatic. Some estimated fuel would increase by 13 cents to 15 cents a gallon.

The three days of hearings on the bill, which included testimony from more than 50 witnesses, mostly supporters of the legislation, was characterized by often contentious debate among committee members.

The hearings were kicked off by the bill’s chief author, Sen. John Kerry (D-Mass.).

In his remarks, Kerry said the transportation sector would not be regulated by the climate change legislation but conceded that it would cause an increase in energy costs.

Kerry said the bill, the Clean Energy Jobs and American Power Act of 2009, would regulate 7,500 stationary businesses that release roughly 75% of all carbon emissions in the United States.

“Agriculture is exempt,” Kerry testified at an Oct. 27 hearing of the committee. “Transportation is ex-empt. Small business is exempt.”

Responding to comments made by Sen. James Inhofe (R-Okla.), an opponent of the legislation, Kerry acknowledged that the bill would raise energy prices.

“Are there some costs?” Kerry asked. “Yes, sir, there are some costs.”

Kerry said that while many studies showed limiting greenhouse gases would lead to higher energy prices, “none of them factor in the cost of doing nothing.”

The legislation is designed to reduce greenhouse gases, create green jobs and lessen U.S. dependence on foreign oil, said Sen. Barbara Boxer (D-Calif.), the bill’s co-sponsor and chairwoman of the committee.

At press time, it was unclear if co-sponsors Boxer and Kerry had the votes needed for it to pass the full Senate. Sen. Max Baucus (D-Mont.) said as the hearings began Oct. 27 that he had “serious concerns” over the bill; Republicans are attempting to slow the bill and are threatening to boycott Boxer’s plan to begin a committee mark-up as early as this week.

Brett Vassey, president of the Virginia Manufacturers Association, told the committee that the cap-and-trade legislation allows politicians to choose “winners and losers” in the economy because it allows some energy users permits to emit more carbon than others.

That would cause some manufacturers to reduce production levels to meet their emission targets and put them at a disadvantage globally.

“Is this really fair for to the American consumer or to our industry?” Valero’s Klesse asked. “As diesel fuel prices increase, what happens to the jobs in railroads and trucking?”

Several committee Republicans appeared to be pushing a change to the bill that would add financial incentives to build nuclear power plants as a way to increase low-carbon energy production nationwide.

But Boxer said the bill would only cost the average U.S. consumer an extra 30 cents a day.