ERMUSR MISC MEMO 08-12-2008 - Laserfiche WebLink

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' r etter e ~ ~n e Obama and McCain both support a new law: A cap and trade scheme...limiting emissions of greenhouse gases and providing tradable credits for companies that cut even deeper. The two men differ, though, on the degree of emissions reductions needed and on whether industries hard-pressed by competition from overseas should get a pass or at least extra help. A Democratic Congress makes an OK certain by 2010. Odds are regs will kick in within six ~. Costs will start climbing, before then, as firms make investment decisions based on what's coming. Hit first and hardest: Coal producers and users. Coal burning power plants will be retired early, and utilities will shift wherever possible to natural gas, nuclear and renewable fuels. Even development of technology to capture and sequester C02 won't save power plant coal consumption from a 60%-90% drop over two decades. Electric bills will climb for everyone...most steeply for factories in the East and Midwest, served mainly by coal burning plants. More modest jumps in the West, with its host of natural gas and hydroelectric plants, and for those served by riuclear. Also socked especially hard: Metals manufacturers. Global competition leaves them little room to pass on higher prices, and their energy needs are great. Plants that recycle scrap...using less energy and producing fewer emissions than primary producers and integrated steel mills...will have an increased edge. Integrated oil companies will be pressed to boost production efficiencies. A wallop too for aviation...even if U.S. climate legislation lets it slide... because the European Union will include aircraft in its emissions trading scheme. Any U.S. carriers that land at or take off from EU airports will be roped in. For chemical makers caps well both bad and good news: Increased costs to cut or offset emissions of a wide variety of greenhouse gases created in production. But also opportunities to gain from other industries' drive for energy efficiency... more demand for photovoltaic cells, more plastics in autos and aircraft and so on. For financial services...a silver lining: A brisk new line of business in trading emissions credits will likely offset any loss from the drag on the economy. The country will lose 5000 gas stations this year, more than twice as many ® as last year and the worst dropout rate since the 2001 recession. As motorists cut back, competition from big chains is driving out independents. Discounts for cash are making a comeback. Wafer-thin profit margins are devoured by fees to credit card firms. Most motorists now buy fuel with plastic. Getting a big_push from industry: Synthetic gasoline and diesel...liquid fuels that are made from biomass but, unlike ethanol and biodiesel, are chemically identical to petroleum-based products. That gives the biomass synfuels a big advantage: They can be shipped, stored and pumped using the same facilities and equipment as the real McCoys. Early leaders include Choren Industries, which is partnering with Royal Dutch Shell on a pilot plant in Germany and is mulling another in the U.S. And Amyris Biotechnologies, which has a pilot facility in the works in Brazil and plans one for the Southeast U.S. Also in the race: Gevo Inc. and LS9. Demand for biomass will soar in coming years...fueled by development of cellulosic ethanol and utilities that burn biomass directly, as well as by synfuels. For many businesses, crop and forestry waste, sawdust, orange peels, whey... waste of all sorts, in fact...will evolve from liabilities that must be disposed of to valuable commodities. Municipalities may even turn trash into income streams. To facilitate market development, the Biomass Commodity Exchanee is gearing up. With help from the Agriculture Dept., the BCEX will debut next year At first, it will look more like Craigslist than the Chicago Board of Trade, though, with members using a Web site to list what they have to sell or want to buy.