Congressional Steel Caucus Seeks Equitable Climate Change Legislation For Steelworkers

Press Release

The Congressional Steel Caucus, led by Chairman Pete Visclosky and Vice Chairman Tim Murphy, today sent a letter to Speaker Nancy Pelosi, House Energy and Commerce Committee Chairman Henry Waxman, and Subcommittee on Energy and the Environment Chairman Ed Markey urging them to address international competitiveness issues for American steelworkers in their draft climate change legislation. Imposing carbon caps and taxes on the U.S. steel industry would limit steelworkers' ability to compete fairly and result in job loss. Seventeen bipartisan members of the Caucus joined Visclosky and Murphy in sending the letter.

"Climate change is real, it is man made, and we have to do something about it, but the solution must be fair and equitable for American steelworkers and other manufacturers so that they don't lose jobs to China, India, and Brazil, where there are no emissions penalties," said Visclosky. "Our steelworkers are the most efficient in the world, but they have enough challenges competing against illegally subsidized imports as it is. We cannot afford to hamstring them even more with unfair carbon caps and taxes that would imperil their jobs."

"The American steel industry is the most efficient and productive in the world. Any climate change legislation must recognize this fact and not punish American workers and families by exporting our manufacturing jobs to China," Murphy said. "Congress must pass energy legislation that will clean the environment, create jobs, and make America energy independent. The U.S. leads the world in emission standards and we need to encourage other countries to join us. Congress should not set the standard so high that our companies would be put at a competitive disadvantage in the global marketplace and be forced to move their businesses overseas."

The letter warns that additional costs incurred by steel producers under proposed climate change legislation would limit their global competitiveness and undercut the health and viability of American manufacturing. The result would be an influx of cheaper steel imported from countries without climate change laws, the decline of the steel industry, and the loss of thousands of steelworker jobs. Therefore, modifications to the draft legislation are needed to address threats to U.S. steelworkers' international competitiveness. Specifically, the Steel Caucus wants the legislation to include the following fair and equitable provisions:

Adequate allowances for carbon intensive industries such as steel;

Powerful tools to ensure imports are subject to the same carbon costs as are placed on domestic goods;

Exemptions to make up for the fact that industrial processes such as steelmaking cannot occur without certain amounts of carbon emissions; and

Credits or offsets to account for the value of other emissions-reducing efforts, such as recycling scrap steel and reducing energy consumption at steel mills and other plants.

The Congressional Steel Caucus is a bipartisan group of 100 Members of Congress who represent districts with steel manufacturers or care about the health of the American steel industry. Through legislation, roundtable discussions, and hearings, the Steel Caucus focuses on the needs of the steel industry and what it takes to level the playing field for employers and preserve American jobs. The following is the full text of the Caucus' letter to Pelosi, Waxman, and Markey:

Dear Speaker Pelosi, Chairman Waxman, and Chairman Markey:

As members of the Congressional Steel Caucus, we recognize addressing climate change to be a challenging legislative task of immense complexity and often competing interests. Our objective in writing is to emphasize the vital importance of addressing the international competitiveness issue confronting American producers and workers if they are forced to incur new costs and burdens not placed on their foreign competitors.

The current economic recession is exerting disproportionate harmful impact on the manufacturing sector in general, and on steel-producing regions of the country in particular. We must be cautious about further burdening these important segments of American society.

Dealing with the competitiveness issue is essential to both the environmental goals of climate legislation, and to ensuring the health and viability of American manufacturing, and is of great importance to the members of the Steel Caucus. We are proud of the domestic steel industry's ability to reduce total energy consumption by more than 33 percent since 1990 and believe the direction of this trend will continue because it makes good business sense. However, placing additional costs on American producers and workers without ensuring commensurate treatment of their international competitors will result in disastrous consequences to the American economy. American production will simply be displaced by production in foreign countries without similar environmental requirements, and often with far greater per-unit emissions of greenhouse gases. In other words, U.S. industries and jobs will be lost and global greenhouse gas emissions will rise.

While legislative proposals to fight climate change, including the discussion draft issued by Chairmen Waxman and Markey, include provisions that acknowledge the issues of competitive disadvantage and carbon leakage, further refinement is necessary to address our underlying concerns. In order to craft comprehensive competitiveness provisions that satisfy the needs of domestic producers and protect American jobs, several elements are necessary beyond the foundational work that must first be done to build sufficient low-carbon electricity infrastructure for the nation, greatly expand low carbon technology research and development, and foster energy conservation throughout the economy.

First, under a cap-and-trade system, there must be sufficient allocation of allowances or rebates to energy-intensive and trade-sensitive industries, such as steel, which will face a competitive disadvantage due to the imposition of new carbon costs. They must also be structured to provide an incentive to maintain or increase domestic production and should only compensate for costs associated with production in the United States. Allocations or rebates to manufacturers will also do much to address the concerns of finished goods producers and exporters by limiting the cost of energy-intensive inputs.

Second, any climate legislation should include from the outset an effective mechanism to ensure that imports are subject to additional costs and burdens that are placed on domestic production beyond those mitigated by allocations or rebates. Given the uncertainty of whether an allowance program will be sufficient to cover all incremental costs from a new climate regime, it is essential that any climate policy include an import mechanism. Such a mechanism can and should be fully compatible with an allowance program as described above, and can be structured to verify that imports only face burdens also imposed upon domestic production.

Third, in addition to a combination of allocations or rebates and border measures, climate change legislation should address the fact that there are some emissions which are the unavoidable result of the chemical processes necessary to produce certain products such as steel. No technology available today - or in the foreseeable future - can eliminate the release of carbon dioxide in the essential process of transforming iron ore into steel. Including such emissions under a national cap aimed at reducing emissions could only be accomplished by shutting down domestic production.

Fourth, the caucus wishes to encourage recycling. The entire domestic steel industry is using more scrap metal and other recyclable materials as raw material feedstock. Such use can significantly reduce energy consumption and even avoid greenhouse gas emissions. Recycling offset credits or allowances should be part of comprehensive greenhouse gas legislation.

Effective measures to ensure a level playing field for our workers and companies are not simply advisable, but imperative - whether they are done in the current economic environment or even during more stable conditions. Addressing these critical issues that domestic manufacturers will face under a climate change program is essential if we are to reduce our carbon emissions, as well as provide an incentive for others to join that commitment. Access to our market is the greatest leverage the United States has in dealing with the rest of the world. If countries like China, India, Russia and others are given a competitive advantage in this market due to insufficient competitiveness measures; it will be very difficult to gain their cooperation in solving this global challenge.

Again, we look forward to working with you in a constructive way as legislative proposals move forward. Solving environmental problems and maintaining a competitive American manufacturing base are not mutually exclusive. The next generation of green products can and will be built here in America and many will be built with steel, but only if Congress takes steps to guarantee that that production is not unnecessarily squandered and that industries like steel have an important role to play in the global, green economy.

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