DOE Report: Climate Treaty Will Devastate U.S. Industries

DOE Report: Climate Treaty Will Devastate U.S. Industries
August 1, 1997

In the most comprehensive study to date examining the potential economic effects of a climate change treaty, a report released on July 15 by the U.S. Department of Energy (DOE) underscores the serious consequences of policies aimed at lowering greenhouse gas emissions.

The study, The Impact of Potential Climate Change Commitments on Energy-Intensive Industries, was undertaken for the DOE by the Argonne National Laboratory in Washington, DC. It explores the hypothetical impact of fuel price increases resulting from policies designed to curb emissions from six major energy-intensive industries in the US. The report shows that higher energy prices brought about by the proposed treaty protocol would severely damage the six industries, while providing little environmental improvement. In fact, the DOE report states that fuel price increases will stifle investment in clean, energy-efficient technologies needed to lower emissions.

The six industries examined in the DOE study are basic chemicals, iron and steel, petroleum refining, aluminum, paper and allied products, and cement. The study reached the following conclusions, among others:

  • Roughly 20 to 30 percent of the basic chemical industry would move to developing countries over 15 to 20 years as new plants are built; DOE estimates accompanying job losses as high as 200,000.
  • U.S. steel shipments would fall 30 percent, with job losses estimated at 100,000.
  • All primary aluminum plants in the U.S. would close by 2010 if fuel price increases are applied to hydro- and thermal-based electricity. Primary aluminum production in the U.S. currently employs 18,000 people.
  • Domestic paper and pulp producers would realize "serious negative employment and output effects" and would not be able to absorb energy price increases absent a "major technological breakthrough."
  • Petroleum energy output would drop 20 percent, with Northeast and Gulf Coast refiners most severely affected. Shutdowns are anticipated at many U.S. refineries located in industrialized countries.
  • Approximately 17 to 26 million metric tons of cement clinker capacity would be shut down in the cement industry, causing the loss of 3,700 to 5,800 jobs, primarily in small communities. Imports would displace domestic production between 37 percent and 46 percent of total consumption by 2010.

Turning its attention to the global implications of a climate treaty, the report renders an even more unfavorable judgement. “The main conclusion of this study is that policy constraints on these six large industries in developed countries, but not on their less developed trading partners, would result in significant adverse impacts on the affected industries,” it notes. "The main effect of the assumed policy would be to redistribute output, employment, and . . . emissions from participating and non-participating countries."

The DOE report comes as the United States and 159 other countries move into the final stage of negotiations on an international protocol to cut emissions of carbon dioxide and other man-made greenhouse gases thought by some, but not all, scientists to be responsible for a projected warming of the planet. Under the guiding hand of Undersecretary of State Timothy Wirth, the talks are aimed at committing the U.S. and other industrialized nations to legally binding reductions in anthropogenic greenhouse gas emissions.

Prior to the DOE report’s July 15 release, copies of a draft had been circulating in Washington for weeks. Its devastating assessment of the effects of a climate treaty on key segments of the U.S. economy alerted the administration that it faced a serious public relations problem. Once the report was formally released, however, administration spokesmen were quick to put the best possible spin on what, by any measure, was an unwelcome message.

"The report confirms the wisdom of the administration's basic approach to climate change," a DOE press release stated, "namely that, in developing policy to meet our environmental objectives in a realistic way without disrupting our economy, we need to employ a variety of market-oriented, flexible measures both at home and abroad, accelerate R&D into new technologies, and adopt an international regime involving the participation of all nations."