Milling & Baking News - July 14, 2009 - 14

Industry Activities 

House passes climate change bill,
Senate bill in the works
Continued from Page 1

contributing editor at Milling & Baking
News.
The tightness in the vote reflected
disagreement among lawmakers and
in the United States as a whole over
how to accomplish the reduction in
greenhouse gas emissions, with a vocal
minority asserting such emissions were
not to blame for climate change and,
therefore, no legislation was required.
The debate now shifts to the Senate, where the Committee on Environment and Public Works held a hearing

on July 7 as it began to craft its climate
change legislation. Senator Barbara
Boxer of California, chairwoman of the
committee, said she hoped to have the
Senate's bill completed before the August recess, but the full Senate wasn't
expected to consider a bill until the fall.
H.R. 2454 would require a 17% reduction in carbon emissions from
large sources by 2020 compared with
2005 levels and an 83% reduction by
2050. A large source was defined as an
entity emitting annually 25,000 tons or
more of greenhouse gases, in carbon
dioxide equivalent.
The bill would establish a carbon-allowance cap-and-trade system starting
in 2012. Allowable carbon equivalent
emissions would be capped at 2005
levels for the economy and for each
regulated entity. Initially, 75% of carbon-emission allowances required to
maintain operations would be provided to covered entities at no cost, based
on formulae. The remaining required
allowances would be sold at auction.
14 / July 14, 2009 Milling & Baking News

By 2030, 75% of the progressively
reduced carbon allowances would
be sold by the Environmental Protection Agency to covered entities
under the cap-and-trade approach.
Allowance holders would be permitted to emit more greenhouse
gases than allowed under their
original credits by purchasing additional allowances or offsets from
those holding but no longer requiring such allowances or offsets or on
markets the bill anticipates will be
established for trading carbon-emission allowances and offset credits.
The bill would require the trading
of energy derivatives (including energy swaps), carbon-emission allowances, offset credits and renewableelectricity credits occur on markets
regulated by the Commodity Futures
Trading Commission. Trading in energy futures would be subject to new
rules, including limits and conditions
on the C.F.T.C. granting hedge exemptions; repeal of no-action letters
issued by the C.F.T.C. granting relief from speculative position limits;
establishing a position limit energy
advisory group to advise the C.F.T.C.
on position limits; defining a "bona
fide hedge" for energy markets, and
enhancing reporting for index traders
and swap dealers.
In addition to buying carbon-emission allowances on the market, those
requiring more time in reaching their
emission targets would be able to
purchase emission credits from individuals and entities, including farmers, earning such credits through approved projects that result in a net reduction of greenhouse gas emissions.
A deal struck between Representative Henry Waxman of California,
chairman of the House Committee on
Energy and Commerce and chief sponsor of H.R. 2454, and Representative
Collin Peterson of Minnesota, chairman of the Committee on Agriculture,
bestowed on agriculture a special status and secured much needed votes
for the bill's passage.
The Waxman-Peterson agreement
exempted agricultural and forestry
production from the bill's greenhouse
gas emissions cap and established an
agricultural and forestry carbon-offset
program that would be administered
by the U.S. Department of Agriculture. Under the offset program, farmers, ranchers and foresters may earn

carbon credits for practices - such as
no-till farming and planting of trees on
farmland - that sequester carbon and
thereby reduce greenhouse gas emissions. The credits apply retroactively
to such projects implemented as long
ago as 2001. Producers may sell their
carbon credits to polluting industries
under the cap-and-trade system.
Mr. Peterson also secured other
plums for agriculture to sweeten the
deal, including adoption of an agriculture-friendly definition of renewable biomass such as was contained
in the 2008 farm law and prohibiting
the E.P.A. from calculating indirect
land use impacts of biofuels production for five years and until a study
is conducted to determine whether
an E.P.A. standard on such impacts
is warranted.
Dr. Giesecke said higher costs to
bakers will come from several directions as a result of the new law.
"At this time, the focus of the bill is
on large energy users such as utilities,
steel and cement," she said. "Consequently, when a bill becomes law, bakers and snack food manufacturers will
notice increases in energy costs and
construction costs. In addition, some
bill language suggests that if you build
a bakery, you may need to buy allowances or offset emissions in some other
way. Because bakers are small greenhouse gas producers, the costs for the
few credits they may have to buy will
be relatively costly to the business.
Parallel with the legislation, the Environmental Protection Agency will
require 2010 reporting of greenhouse
gases from all industrial facilities, including bakeries. The E.P.A. also has
the authority to control greenhouse
gas emissions from mobile sources,
which will impact the cost of trucks."
The National Grain and Feed Association, the North American Millers'
Association and seven other agribusiness associations urged the House to
reject the bill.
"While food, feed and beverage
producers account for 1.21% of the nation's direct greenhouse gas emissions,
we will be more affected by cap-andtrade legislation than this suggests,"
the groups said. "All members of
the food supply chain are disproportionately vulnerable to indirect costs
passed through by suppliers. When
considering the total greenhouse gas
emissions from each sector, including
suppliers, the food, feed and beverage sector has the fourth-largest exposure to carbon costs - more than the
chemical, retail, basic resources
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Milling & Baking News - July 14, 2009

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