Washington Insider -- Wednesday

BP Claims Need for Carbon Tax

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

House Work on Highway Bill Begins

House Transportation and Infrastructure Committee Chairman Rep. Bill Shuster, R-Pa., said on Tuesday that he is “looking forward to the challenge” of pushing a $325 billion highway bill through the lower chamber this week.

Lawmakers in the House began voting on Nov. 2 on about 280 amendments filed for the legislation in a bid to display a more open process under new House Speaker Rep. Paul Ryan, R-Wis.

Shuster told the Rules Committee on Nov. 2 that the Senate’s revenue offsets would pay for three years of authorizations. The House’s transportation policy will be inserted in place of the Senate’s, he said.

“This is important to the economy, to the jobs and American competitiveness for us to rebuild and expand our infrastructure in this country that so badly needs it,” said Schuster.

“It’s a bipartisan bill,” Shuster continued. “It’s a six-year bill. It creates flexibility for states, which they’ve asked for. This six- year bill creates more certainty for the folks out there that are doing the work on our roads and infrastructure around the country.”

The Obama administration praised the bipartisan work in a statement of policy, but noted “significant shortcomings” in the combined House and Senate legislation, including funding that would remain at current levels. The administration also objected to what it identified as an 80% cut to the Transportation Infrastructure Finance and Innovation Act loan program.

The administration voiced support for the Senate provision that would reauthorize the Export-Import Bank. “We look forward to continuing to work with the Congress to pass a more meaningful transportation bill and an EX-IM reauthorization,” the administration said.

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US to Seek Beef Quota Changes in TTIP Talks

European Union (EU) beef import quotas are no longer delivering the promised benefits to US exporters, according to a high ranking US official, who says the issue has been pushed up the agenda in talks for a Transatlantic Trade and Investment Partnership (TTIP) deal, according to reporting by Agra Europe.

Stan Phillips, agriculture counsellor at the US embassy in London, said US exporters have become increasingly frustrated at the way the EU manages its High Quality Beef quota.

Speaking at the Agriculture & Horticulture Development Board Beef and Lamb conference in Warwick, UK on Nov. 3, Phillips explained how the High Quality Beef quota was originally created as the solution to a long-running dispute over hormone-treated beef. Initially reserved for US suppliers of hormone-free beef, access to the quota has since been extended to five other countries, namely Canada, Australia, Uruguay, New Zealand and most recently Argentina

Faced with this competition, US exporters have steadily seen their share of the High Quality Beef quota eroded. “The US share is now less than 50% so it is no longer delivering what it was intended to,” Phillips explained. He went on to note the US beef industry had been “very vocal” in making its concerns known to negotiators, adding that this has now been “factored into discussions.”

Phillips said there was still “much to be done” in TTIP talks, describing the latest round – the 11 so far – as just “the beginning stages”. He recalled that negotiations for a US-South Korea free trade deal went on for so long that negotiators eventually stopped numbering each round of talks.

Pressed over whether US negotiators would insist on an end to the EU ban on hormone-treated beef, Phillips said he believed they would be more concerned with how the bloc manages its import quotas [for hormone-free product].

Phillips downplayed suggestions that the progress of TTIP negotiations would be significantly affected by the recent breakthrough in talks for a Trans-Pacific Partnership (TPP) deal involving the US and 11 other nations.

“TTIP is moving at its own pace and the issues involved are different,” he stated. At the same time, Phillips suggested issues such as beef quotas would have to be adequately addressed if negotiators are to secure a deal acceptable to US lawmakers.

“It has to be passed by Congress at the end of the day and this is unlikely unless it addresses key issues raised by the [US} agriculture industry,” he stated.

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Washington Insider: WSJ: BP Claims Need for Carbon Tax

The energy giant BP released a report on the need for a carbon tax in the US that was recapped in the Wall Street Journal this week. The article said that a system of levies on carbon emissions is needed to bring renewable sources of energy to cost-parity or better with natural gas and coal through 2050.

The report includes some fairly specific figures. For example, BP says that a price of $40 per ton of carbon emissions is needed to make natural gas a more economical source of energy than coal, and that even higher carbon prices are needed to make wind and solar energy cost-competitive.

Coal is expected to remain “the top fuel for power generation through 2035,” BP said although its share of total generation will be eroded by natural gas and renewables. The report also predicted liquid fuels will remain the primary source of energy for transportation for decades to come.

The report said a carbon tax would have the effect of driving up the use and competitiveness of cleaner-burning fossil fuels like natural gas and would make renewables more cost-competitive. Additionally, each 1 percent switch from coal-fired to gas-fired power generation would be equal to cutting carbon emissions by boosting renewable energy by 11 percent, the Journal reported, citing BP CEO Bob Dudley’s earlier remarks.

But, “without a price on carbon, fossil fuels are fiercely competitive,” David Eyton, BP’s technology chief said. He commented that a global summit on climate change, with a goal of limiting man-made global warming to two degrees Celsius above levels seen before the industrial revolution, is scheduled to begin in Paris at the end of the month and fossil fuel emissions will certainly be part of the discussion.

For their part, the coal industry has emphasized new “clean” technologies that could dramatically reduce the carbon emissions associated with burning coal, such as carbon capture and sequestration.

So, the question of how high the tax should be is extremely controversial. An overall carbon tax of between $40 and $80 per ton would be needed to make any significant impact on which energy resources are most competitive but even higher carbon prices might prove more beneficial. “All the analysis I’ve seen suggests that you need to have a price on carbon considerably higher than the sorts of prices that we’ve used here to stabilize at two degrees centigrade,” BP’s David Eyton said.

It is not entirely strange that BP, in spite of its stake in energy production, would see an interest in policies that could weigh heavily on coal--but it does seem to be a break in the broad effort of many business interests who suggest that global warming is being oversold; or, even is something of a hoax. In addition, given the current US political leadership, there seems to be no chance of a significant carbon emissions tax being even considered let along implemented.

Still, pressures for such an effort could grow, depending on the outcome of the upcoming summit scheduled for Paris—especially if developing countries move toward effective measures in limiting GHG emissions. Thus, these discussions should be watched carefully by producers, as they proceed, Washington Insider believes.


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(GH/SK)