Climate Change Legislation

Why the Beet Sugar Processing
Sector Is So Concerned

This chart compares the levels of annual greenhouse gas emissions (as of 2007) that come from various industries, including sugarbeet processing. The beet sugar sector — at 4.3 million metric tons of CO2 — is very minor compared to the other noted industries, both “covered” and “not covered.”

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Why should beet producers be interested in — and concerned about — pending climate change legislation?

     That was the question Janet Anderson sought to answer in her presentation at the early February annual meeting of the American Sugarbeet Growers Association. Anderson, who is senior technology and policy advisor for the Washington, D.C., consulting firm of VanNess Feldman, focuses on providing government policy counsel in the areas of global climate change, efficiency, clean technology and air quality.

​     Anderson outlined the two-decade history of international climate change discussions and agreements under the auspices of the United Nations. In 1992, she pointed out, the United States was one of the signers of the binding — but unenforceable — Rio Earth Summit agreement that essentially created the UN framework. “All the [signers] agreed they would stabilize greenhouse gas concentrations at a level that would prevent dangerous manmade interference with the climate system,” she said. Conferences of the parties (COPs) have been held regularly since then — among them, the familiar Kyoto summit of 1997.

Janet Anderson

     “What makes climate change a problem for burning fossil fuels is that [doing so] increases the concentration of greenhouse gases — in particular, CO2, methane, nitrous oxide and a few other trace gases,” Anderson observed. There is scientific consensus that an increase in greenhouse gas concentrations of more than two times that of “pre-industrial” levels carries with it dangerous consequences for Earth’s climate, she added. The concentration of CO2 has gone from 280 parts per million in pre-industrial times to now 380 ppm — “and the globe is very much on track to hit 550 ppm in short order,” Anderson stated.

     Since the early 2000s, a number of legislative proposals have come forth in the U.S. Congress on this nation’s role in addressing climate change. Some of those proposals remain “on the table” as of 2010. The majority have focused on market-based programs — i.e., “cap and trade” bills that offer industries economic incentives to cut their greenhouse emissions — and, as well, disincentives if they don’t. Over time, newer legislative proposals have tended to be more stringent than their earlier counterparts.

     So what, about all this, is of such concern to the sugarbeet industry?

     Legislation working its way through Congress addresses both “covered” industries and “uncovered” sectors. Industries like electrical generation and petroleum refining fall within the “covered” category, while production agriculture is among the “uncovered” ones. The difference between being in one sector versus the other generally lies in the difficulty in measuring and accounting for a certain type of emission and in administering enforcement, according to Anderson. Agriculture is “uncovered” since it is virtually impossible to accurately keep track of emissions from their sources, e.g., individual farms. About 15% of the overall U.S. economy consists of uncovered sectors.

     “The over-arching goal of a cap-andtrade system — or basically any CO2 regulatory program — is to shift the economy, including manufacturing, away from existing practices, to practices that emit less CO2 per unit of economic output,” Anderson explained. For the beet processing sector, that would equate to less CO2 per ton of sugar produced.

   The sugarbeet processing sector is at risk for this primary reason: About 90% of U.S. beet processing factories are coal-fired. That’s in sharp contrast to the domestic sugarcane industry, where most cane mills use large quantities
of bagasse — a cane byproduct — to fuel their boilers.

     Compared to an industry like electricity generation, the amount of CO2 emitted by the nation’s sugarbeet factories is very small. (See chart at left.) The combined beet processing sector emits about 4.3 million metric tons per year — roughly the same as a single medium-sized (600 megawatt) coalfired power station, Anderson noted. But because beet factories fall into the “covered” industry category, they must surrender allowances (a type of “getout-of-jail-free card”) to EPA equal to the volume of their on-site emissions.

     The picture gets quite complicated, with different “allowance prices” depending on whether an industry is considered EITE (energy-intensive and trade-exposed) — which sugar is. The bottom line is this: The beet sugar processing sector’s cost of complying with legislation passed by the U.S. House last June — the Waxman-Markey bill — would start out at around $20 million in 2014 and rise to about $80 million annually by 2025. Under less-optimistic assumptions regarding the price of emission allowances (the “get-out-ofjail- free card”), those costs would start at about $30 million in 2014 and end up at about $125 million by 2025.

     Meanwhile, the sugarcane industry’s cost for compliance would be much less (due to its use of bagasse) — thus placing the beet sector at a severe competitive disadvantage. Should such legislation be passed, “it [basically amounts to] a 10-year orderly shutdown of your industry,” Anderson stated. “After ‘free allowances’ disappear, it would become extremely difficult for beets to compete with cane.”

  The sugarbeet industry is not rolling over and waiting for the axe to fall as Congress continues its deliberations of climate change legislation. It is working with similarly affected ag industries to make sure its concerns are heard in Congress. (See Luther Markwart’s comments on page 14.) Noting that no legislative package has yet come out of Congress, “this is still a good time for your industry to be working on this issue,” Anderson stated.
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     It’s also important for the sugarbeet industry to stay alert to state and regional climate programs, she added. Examples are those developing for California, for a consortium of northeastern U.S. states, and the Midwest Greenhouse Gas Reduction Accord.

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Source: VanNess Feldman

     This chart shows the estimated costs sugarbeet processors could be expected to incur under provisions of the Kerry-Boxer bill that has been introduced in the U.S. Senate. Under the “no international” allowance-price scenario, the annual cost would be about $30 million in 2014, rising to nearly $125 million as of 2025. It’s based on U.S. sugar beet factories, as a group, emitting about 4.3 million metric tons of C02 annually. The scenario under the Waxman-Markey bill, which has passed the U.S. House, is fairly similar.

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