Lobbyists for Detroit's Big Three automakers are pushing Michigan's two Democratic senators, Carl Levin and Debbie Stabenow, hard on behalf of a Low Carbon Fuel Standard (LCFS) to be included in the compromise version of President Obama's cap-and-trade energy bill that could be voted on in the Senate later this week or early next week.
The amendment, a version of which can be read here courtesy of Politico, would force refiners and other fuel suppliers such as the coal and natural gas industries to steadily reduce the carbon content of their products. Environmentalists have been pushing for state-level LCFS measures for several years as a way of reducing greenhouse gas emissions allegedly causing global warming.
Given the difficulty of achieving the LCFS levels of carbon reduction, the program would, according to energy industry advocates, force companies to participate in a government-run cap-and-trade style program of buying and selling carbon emissions standards.
Critics of the LCFS standards point out that major questions about the credibility of the global warming movement and the science behind are growing rapidly, thus calling into question the need and advisability of forcing costly changes on the economy and consumers.
“By selling the LCFS as a cap-and-trade for cars and trucks, you’re essentially conceding that regulated parties will have no practical ability to meet the standards laid out under the plan, and will therefore be forced to buy credits to remain in business. It’s a fairly stunning concession that these folks are making here, and one that will have huge consequences for states that rely on sources of energy explicitly targeted under an LCFS regime, foremost, Michigan,” said Chris Tucker, a spokesman for the Consumer Energy Alliance.
The CEA is an energy industry backed consumer advocacy group.
At present, consumers and businesses in Michigan import an estimated 5.27 million barrels of petroleum and petroleum products just from Canada. Because the Canadian oil tends to have higher carbon content, it would be hit harder by the proposed LCFS, thus adding to the many problems facing Michigan's already devastated economy.
Critics of the LCFS standards also argue that major questions about the credibility of the global warming movement and the science behind are growing rapidly, thus calling into question the need and advisability of forcing costly changes on the economy and consumers.
The LCFS being pushed by the automakers now, however, would be a national standard, which could drive gasoline prices far above the $4 levels seen last summer across the nation. A study by the Charles Rivers Associates, a Boston-based econometric consulting firm, projected gas prices of nearly $5 per gallon within five years of adoption, and nearly $7.50 per gallon within a decade of adoption.
Those projections are exclusive of any other government mandates or policy changes that might also increase the cost of gas for motorists, manufacturers, and businesses.
In addition to causing major gas price hikes, the national LCFS would:
* Cause an estimated net loss of 2.3 million to 4.5 million American jobs by 2025 from baseline levels. As many as 1.5 million of these jobs would be in the manufacturing sector, while as many as 3 million would be in the service sector.
These job cuts reflect the cumulative impact businesses would face from reduced consumer demand and higher costs for goods and services caused by an LCFS.
* Drive down household annual purchasing power by between $1,400 and $2,400 by 2025.
* Cause the U.S. Gross Domestic Product to decline by approximately 2 to 3 percent, or $410 billion to $750 billion, by 2025.
The River study was conducted for the Consumer Energy Alliance, an energy industry related consumer group. You can read the study here.
With the automakers pushing the LCFS standard, questions may again be asked if federal officials are pressuring General Motors and Chrysler executives to champion legislative measures favored by President Obama and congressional Democrats even though those measures could have dramatically negative consequences for auto buyers.
Both GM and Chrysler were bailed out last year by the Obama administration, with the government and the United Auto Workers gaining controlling interests in the firm, and brokering sale of Chrysler to the Italian conglomerate Fiat. Ford alone among the Big Three did not accept any government funds or other "assistance" during the economic crisis last year.
Even so, The Hill reports that all three American manufacturers, as well as the auto industry's Washington trade association, are pushing for the LCFS. I've asked a Ford spokesman here in Washington if Dearborn is supporting the LCFS proposal, but have not received a response.
The emerging LCFS controversy is not the first time questions have been raised about whether the government has pressured the auto companies it controls to lobby Congress. Similar questions were raised last year after GM and Chrysler gave in to Obama administration pressure to withdraw from thousands of franchise agreements with independent car and truck dealers.
There were similar suggestions in Congress concerning the industry's change of position regarding greenhouse gas emissions regulations. And there have been questions about the Treasury Department's role in GM's controversial "repayment" of its TARP loans.
And it took members of Congress all of about 12 seconds after the government bailouts were official to begin exerting political pressures on GM and Chrysler on behalf of their constituents being affected by plant closures, dealership closings, and other decisions.