Monday, March 10, 2008

Responding to fertilizer fears

Below is a response I received from Sen. Lieberman's office regarding charges that the fertilizer industry has made about potential increased costs to fertilizer coming from the Lieberman-Warner climate bill. The bottom line is that the bill has a provision to minimize any potential cost increase.

The bill directs EPA to hand back to the fertilizer manufacturers any allowances that were submitted upstream for natural gas or petroleum products, to the extent natural gas or petroleum products in question are used as feedstock for fertilizer manufacture, and to the extent that the feedstock use locks the carbon in the fertilizer rather than releasing it to the atmosphere at the fertilizer manufacturing plant.

My understanding is that such a crediting-back provision will end up erasing at least 65% of the cost that the bill otherwise would impose on fertilizer manufacturers.

Last Friday I met with members of the Fertilizer Institute and explained this to them. I told them that we were likely make this clarifying change to the existing feedstock credit provision in the bill (section 1202(e)): Delete "such that no group I greenhouse gas associated with that feedstock will be emitted," and replace with "to the extent that no group I greenhouse gasses are emitted from the use of feedstock.”

And that we intend to include this language about section 1202(e) in the committee report:

This subsection provides that the Administrator of the EPA shall distribute to any entity that uses petroleum- or coal-based product, natural gas, or natural gas liquid as a feedstock during the life of the program a quantity of emission allowances equal to the quantity of allowances, offsets, or international offsets submitted under section 1202(a) for that feedstock. Feedstock is a substance used as a raw material in an industrial process to make an intermediate or final product, such as the use of natural gas to manufacture plastics. For the portion of the fuel that is used as feedstock that does not result in GHG emissions, the Administrator shall establish and distribute to downstream entities a quantity of emission allowances equivalent to the allowances submitted by covered entities under section 1202(a). The requirement to submit allowances under section 1202(a) is calculated based on the assumption that all fossil fuels are combusted resulting in the release of the greenhouse gases generated during combustion. This provision is intended to compensate for that assumption by establishing allowances equal to the quantity of greenhouse gas emissions that do not occur due to the feedstock use of some fuel.

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