Reports on API’s climate change study miss some important facts

Yesterday, the API released a study claiming that imposition of House Bill 2454 (ACES) would shift a significant amount of refining capacity of domestically produced fuels (about 10% more than business as usual) from the United States to foreign countries.

As noted in Tom Fowler’s energy blog, the study makes several assumptions which ignore things likely to occur, such as changes in technology costs, use of low cost offsets, and fuel switching to more climate friendly fuels.

But an even greater problem with the assumptions is that it seems to ignore the restrictions placed on IMPORTS of fuel coming into the US from refineries abroad.  (It is actually hard to tell since the “report” that the API claims to rely upon in its press release is actually a power point that doesn’t define all of its key terms).

So let’s start with some basics.  HB 2454 requires both domestic producers of fuel for the US consumer market as well as importers of such fuels refined abroad to hold rights for the total emissions of those fuels.(HB 2452, Section 722(b)(2)).  And also see covered entities in Section 700(13)(a)(1). (note: both links require one extra ‘click’ once you get to the page)

In other words, there is a level playing field between domestic producers AND importers in terms of the cost of complying with HB 2454 are concerned.  In fact, the domestic producers actually get 2.25% of all emission allowances for free (which is about 7% of the transportation sector’s fuel requirements since it produces about 30% of the national total), which foreign refiners (assuming they are not also the US domestics) don’t get.

It is possible that in general, foreign refineries will increase their capacity relative to US refiners to the extent they both export fuel to countries that DON’T limit greenhouse gases, since HB2454 only applies to the US market, but the API study doesn’t note the fact that the relative capacities would totally be related to foreign sales (not something that we want to think about with energy security).  This of course also ignores the fact that there will likely be an international agreement with some restrictions for all countries, and the many other provisions of HB 2454 that seek to ensure that energy gains here are not offset by “leakage” to other countries.

In another note, a sharp eyed student pointed out that yesterday’s blog on what would happen IF there is no passage of a federal law failed to note the restrictions that the EPA will likely put on in the absence of comprehensive federal legislation, and incredibly important point that I will write about tomorrow.  Still, as a best pass at the difference between controls and no controls on greenhouse gases, I think the discussion of effects is essentially correct.