Some Industries Leery of Biden’s Big-Economies Climate Talks

Source: By Dean Scott, Bloomberg Law • Posted: Wednesday, March 3, 2021

President Joe Biden’s pledge to revive talks among the world’s biggest emitting nations has raised concern among some key U.S. industries that they could be on the losing end of any effort to set sector-specific limits on carbon emissions.

Reconvening the Major Economies Forum—which the Bush and Obama administrations used in part to push nations to reach a United Nations climate deal in 2015—was tucked into a climate change executive order that Biden issued in January after reversing President Donald Trump’s withdrawal from the Paris climate accord.

Some in the U.S. steel and cement industries, while welcoming the U.S. return to the global climate stage, said they worry that the resurrection of the major economies talks could spur the setting of sector-specific global goals or targets, and say the world has changed since the forum was launched in 2007.

They’re particularly wary that any move toward industry-specific limits won’t account for progress U.S. carbon-intensive industries have already made.

“I’m not sure it necessarily makes sense” to rely on the forum to spur more global action, said American Iron and Steel industry President and CEO Kevin Dempsey. “But I’m keeping my eyes open to see what the administration puts forward.”

Victim of Its Success

Many say the forum was a victim of its success, having served to goad the world’s biggest economies to agree in Paris to the landmark climate accord.

But a State Department spokesman said “reinvigorating” meetings between the largest economies—including the U.S. and rapidly developing China and India—is paramount given their outsized impact on global emissions.

“It’s more important than ever to ensure the 17 economies responsible for 80% of emissions and 80% of GDP are pulling in the same direction in responding to the climate crisis,” the spokesman said.

The forum will be formally reconvened at the world leaders’ climate summit Biden has scheduled for April 22—Earth Day, the spokesman said.

Sector Focus Revived

The major economies talks, launched in 2007, put the largest emitters in the same room for a decade. It included Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, South Africa, the United Kingdom, and the U.S.

The MEF ran nearly a decade under Presidents George W. Bush and Barack Obama, but languished during the Trump administration. The talks put front and center industry-specific actions that curb emissions in steel, cement, aluminum, and other sectors.

Biden announced in a Jan. 27 executive order that he was resurrecting the forum to pursue a “green” economic recovery and more clean energy, as well as progress on “sectoral decarbonization.”

The forum’s return affirms that having the major emitters around the table remains crucial, even after nations reached the 2015 Paris accord, said Jim Connaughton, who represented the U.S. at the forum under Bush.

Even the Paris accord’s biggest boosters concede it falls short of avoiding the worst consequences of climate change, he said.

“To a degree, this is a back-to-the-future moment,” said Connaughton, who also chaired Bush’s White House Council on Environmental Quality. “Not withstanding progress on power generation, and forthcoming progress on transportation and fuels, we still very much need a sectoral process to go after the rest of our economic activity” for emissions reductions, he said.

“There is now a burgeoning and newfound consensus” around focusing on sectors, Connaughton added. “The economics are better, and the sectors are better organized, both domestically and globally.”

But “if it’s only a talk shop,” he noted, “it can’t fulfill it’s mission.”

Elusive Agreement

Resuming the talks could help put pressure on the largest emitters to ready more ambitious climate pledges ahead of U.N. talks between nearly 200 nations slated for Glasgow in November, said Rachel Cleetus, climate and energy policy director for the Union of Concerned Scientists.

A group of the world’s largest emitters “is exactly the set of countries from which we need more ambition,” she said.

Focusing on individual sectors could mean sharing best practices between countries to curb emissions from steel and other industries but also would encourage a “technology push” to get cleaner technologies in plants overseas, Cleetus said.

But the cement and steel sectors are wary of industry-sector actions that could hurt U.S. competitiveness or fail to account for early U.S. success in boosting efficiency and cut emissions.

China produces four times the amount of cement the U.S. does, and the two countries approach cement-making differently.

“I don’t know how you get agreement” on global limits, said Rick Bohan, vice president for sustainability for the Portland Cement Association, which represents most U.S. cement producers.

The U.S. uses different processes for making its cement than overseas competitors, including adding fly ash and slag cement, which reduces the need for raw materials in its production, another challenge to crafting an international agreement, he said.

“People are tempted to say cement-making is just cement making, whether in Australia, Asia, or America—but it’s not,” Bohan said.

U.S. Steel and cement industries argue its competitors also account for a bigger slice of emissions after gobbling up market share. The U.S. for example trails China, India, and Vietnam in worldwide concrete production.

Border Tariff Option

One approach to ensure U.S. sectors are shielded from more carbon-intensive but also cheaper product is a carbon border tariff. Essentially, China and other competitors would face tariffs on products unless they took on comparable emissions reductions.

But many trade experts warn any mechanism would need careful construction to avoid being challenged at the World Trade Organization.

Many U.S. cement and steel producers also are pledging more actions. The Portland Cement Association in November pledged actions toward carbon neutrality by 2050.

And U.S. steel has cut its carbon intensity 37% over the past three decades, the institute says, and has the lowest emissions intensity of its biggest competitors.

The American Iron and Steel industry’s Dempsey argues U.S. efficiency and carbon intensity advantages need to be on the table in any discussion of sector limits. The U.S. uses more efficient electric arc furnaces and integrated mills using pelletized iron—more climate-friendly than low-quality “sintered” iron used in China.

China today dominates global steel production but its product is 2.4 times the emissions intensity of U.S. product, Dempsey said. The U.S. needs “to promote us, not penalize us,” he said, “and certainly not do anything that would create an incentive to import more steel from overseas.”

Dempsey said it’s too soon to judge whether the forum’s return makes sense, but sees it mostly “as a way for President Biden to signal that he wants to be a leader on climate change globally.”