Green Regs Could Cost 4 Million Jobs

[David Blanchard]

Everybody wants to know—and rightly so—exactly how much it would cost the U.S. economy if we went ahead and adopted regulations that would restrict the amount of greenhouse gases companies could emit. One answer, based on a study conducted by the Economic Policy Institute (EPI), is: 4 million jobs.

The non-partisan Alliance for American Manufacturing (AAM) has taken a look at the report, and concluded that legislation currently pending in the U.S. Senate “should include a steady and sufficient supply of emission allowances for energy-intensive, trade-sensitive industries to rebate the cost of compliance, as well as a border adjustment fee on the carbon content of goods from countries that fail to regulate greenhouse gases (GHGs) emitted in the production of goods.”

However, the AAM adds, there’s a very real risk that climate legislation could seriously damage any chances for a near-term economic recovery, particularly if U.S. manufacturers decide it’s far easier and cheaper to step up offshoring efforts than attempt to meet the GHG regulations.

If the United States develops climate change policies that only apply to domestic companies without regard for their effects on trade, the reports author,

Robert E. Scott, author of the EPI study, predicts two things could happen if the climate change legislation ignores the effects such policies could have on trade:

1. “Production of energy-intensive manufactured goods, especially price-sensitive manufactured products that already face high levels of import competition, could rapidly be outsourced to countries like China and India that do not restrict GHG emissions. This could lead to job losses in manufacturing and related industries, and to a growing trade deficit.”

2. “Increased production of energy-intensive goods such as iron and steel, pulp and paper, basic chemicals and glass products in developing countries would be likely to increase net global GHG emissions,” a process known as carbon leakage.

“The stakes are simply too great, and the potential damage to the economy and environment too large, if we fail to adequately address the trade-related implications of climate change,” adds Scott Paul, executive director of the AAM.

The full report can be found here.

[RLoeffler]

If there is not a cohesive trade plan setup for the Green Regs, to solely place the burden on US Manufacturing firms would effectively force the movement of heavy industry offshore. Why try to compete against imports if they don't play by the same rules? Yes, we should try to be "greener" but if the cost of going green forces that work away, it isn't necessarily greener. I would be willing to bet that moving offshore doesn't add any green effect, it probably increases it's net "brown" due to increased emissions due to shipping. We can have all the green effects we want, but if we aren't creating any products then there won't be any green in our pockets anymore.

[David Blanchard]

Originally Posted by RLoeffler

I would be willing to bet that moving offshore doesn't add any green effect, it probably increases its net "brown" due to increased emissions due to shipping.

And you would win that bet. Researchers at MIT, in fact, have calculated the carbon footprint of a banana, and have discovered that a Chiquita banana grown in Central America and sold in Minneapolis would have nearly twice the carbon footprint as one sold in New Orleans. Why? Well, as I explain in a new chapter in my forthcoming book, Supply Chain Management Best Practices, Second Edition:

Chiquita’s bananas are grown in Central America and are shipped by boat to various U.S. ports, and are then stored in regional warehouses before being shipped on refrigerated trucks to their final retail destination. Naturally, then, a banana sold in a port city like Houston or New Orleans will log many fewer transportation and distribution hours than a banana going to a store in Minneapolis, Chicago, or Kansas City. According to [MIT]’s research, a banana sold in Minneapolis would have a carbon footprint of 168 g (grams of carbon dioxide equivalent), whereas that very same banana sold in New Orleans would have a much lower carbon footprint of 97 g.

Developing a green supply chain, like any other decision, requires you to look at the big picture, not just weigh one statistic and make your conclusions from it. I certainly wouldn't want to have to pay a "carbon tax" to buy a bunch of bananas just because I live in Ohio instead of a Gulf port city.

[Frank Chloupek]

Dave, it's dependent as to the specific chain as well. One example that comes up is in the "local food" debate pitting Spanish tomatoes vs. British hothouse tomatoes, which shows a lower carbon footprint for the imports.

However, as with a lot of these debates, what you choose to count as relevant tends to factor into your conclusion.

[David Blanchard]

Originally Posted by Frank Chloupek

what you choose to count as relevant tends to factor into your conclusion.

That's exactly right. The BBC article ends with this observation:

"Only when several similar foods have their carbon footprint measured can shoppers choose their foods accordingly. Until then, shopping locally for what's grown locally (and, preferably, organically) and in season, may be the only guarantee that the food we buy is doing the least possible damage to our environment."

But it leaves out one extremely important consideration: A lot of food is grown in one country or hemisphere and then shipped to another country for purely humanitarian reasons, i.e., to keep people from starving to death, due to drought, genocide or other climate or geopolitical reasons. I don't think they're worrying a whole lot about cow farts and out-of-season apples in East Africa right now; they're just looking for a bowl of rice or cornmeal once a day, no matter what country grew the grains, no matter how much fuel it consumed to transport the rice across the ocean, no matter what the carbon footprint of that grain might be.