Key Vote Letter on H.R. 6, the Energy Policy Act of 2005

Monday, June 20, 2005 - 8:00pm


June 21, 2005


The U.S. Chamber of Commerce, the world's largest business federation,
representing more than three million businesses of every size, sector and region urges you
to oppose any amendment to H.R. 6, the Energy Policy Act of 2005, that would establish a
mandatory cap-and-trade program for greenhouse gas (GHG) emissions. Such amendments
will limit the sources of energy the nation can use, impose millions of dollars in new costs
on businesses, and will cripple the economy.

The U.S. Chamber strongly supports a comprehensive energy policy that will help
improve our domestic security, ensure the nation has adequate and affordable energy,
decrease our dependence on foreign oil, improve our economy, and create jobs. H.R. 6 is
an important step towards achieving this goal. The bill secures greater access to explore
and develop traditional domestic energy resources and provides a renewed commitment to
conservation, the development of energy efficient standards, and renewable energy.

However, a cap on GHG emissions contradicts these goals because it removes energy
options for the nation. Specifically, two carbon dioxide cap amendments are expected to be
offered: one by Senators McCain and Lieberman, which would cap carbon dioxide
emissions at 2000 levels, and another by Senator Bingaman which would establish a
mandatory cap-and-trade program that caps the cost of the credit with an "energy tax" of $7
per ton.

The cost estimates for both programs are substantial. According to a U.S. Energy
Information Administration (EIA) analysis, the McCain-Lieberman amendment is estimated
to cost $852 billion in lost gross domestic product (GDP) by 2025. Similarly, according to
a separate EIA analysis of the National Commission on Energy Policy report, upon which
the Bingaman amendment is based, indicates the economic cost at $569 billion in lost GDP
by 2025. Further, both amendments would force a shift in the production of electricity from
coal, an abundant national resource, to natural gas, an increasingly constrained and
expensive resource.

Mandatory cap-and-trade programs like those expected to be proposed by Senators
McCain-Lieberman, and Senator Bingaman do not address escalating emissions that occur
outside the United States. Developing countries such as China and India are currently
experiencing robust economic growth, resulting in corresponding increases in GHG
emissions. According to the EIA, 62 percent of new GHG emissions will come from the
developing world. China alone is projected to account for half of the total worldwide
increase in GHG emissions over the next 30 years. While global rivals operate unhindered
by meaningful environmental regulations, U.S. companies comply with some of the most
stringent environmental regulations in the world.

Rather than engaging in the costly energy rationing scheme embodied in the McCain-
Lieberman or Bingaman amendments, the Senate should let American technological ingenuity work as it has for decades improving environmental quality. H.R. 6 contains many incentives for
efficiency, renewable energy, nuclear energy, and clean coal technologies, and encourages the export of these technologies to the developing world. These provisions, if implemented, hold the promise of reducing GHG emissions without devastating the U.S. economy.

In 2002, President Bush initiated a plan to reduce U.S. GHG emissions intensity—the ratio of
emissions to economic output by American industry—by 18% by 2012. American industry is on
target to meet or exceed this goal. President Bush's climate change strategy also emphasizes the need for technological innovation to reach greenhouse gas reduction goals.

There is an alternative to the Bingaman and McCain-Lieberman amendments, which the
Chamber supports. Senators Hagel and Pryor are expected to offer an amendment that would
provide an incentives-oriented, cost effective plan for improving greenhouse gas emissions intensity, which addresses both domestic and international components. Hagel-Pryor would provide incentives, loans, loan guarantees, and other financial assistance for advanced climate technology or systems, including coal gasification, carbon sequestration, advanced nuclear power, and renewable energy. It would provide incentives for companies to export this technology to the developing world.

Moreover, the amendment would direct the State Department to act as the lead agency for
integrating the goal of reducing GHG intensity in developing countries into U.S. foreign policy.
The Chamber urges you to oppose the Bingaman and McCain-Lieberman amendments.
Also, the Chamber urges you to support the Hagel-Pryor amendment which encourages the
development of innovative technologies that will benefit energy production and reduce global
GHG emissions. Due to the importance of this issue, the U.S. Chamber will strongly consider
including votes on, or in relation to, these amendments in our annual How They Voted scorecard.

R. Bruce Josten