Wednesday, May 26, 2010

For richer or poorer

"Like it or not, we’re more or less married to fossil fuel," [American Crystal Sugar Co. president and chief executive David] Berg said.

So concludes an article in the May 24 Herald (non-Herald link here) reciting Berg's claim that "[i]f 'cap-and-trade' legislation were to move forward as currently framed, it would be the death knell to the 'world-class efficient' sugar beet industry in the Red River Valley, and much of the rest of the country." Hmmm.

First of all it is not clear which potential legislation is being referred to - the recently unveiled Senate American Power Act? Probably the American Clean Energy And Security Act passed by the House last year. Then I am not familiar enough with the details of whatever bill as relates to the sugar beet industry. So I cannot really say whether Berg is surely right or whether he is using unwarranted hyperbole for some reason, perhaps to fight against climate legislation or to try to attract handouts in the legislation. However I can do some back-of-the-envelope calculations...

The article says that the beet industry has gotten to a point where it produces about 1 ton of CO2 per ton of sugar. A likely initial price range for CO2 emissions like in the American Power Act is $12-$30. So assume that cost needs to be added to the cost of sugar. Looking at the historical USDA-provided U.S. wholesale refined beet sugar prices, there is quite a range, but $600 per ton (from $0.30/pound) looks like a representative value. So adding that $12-$30 means an additional 2%-5%. That cost increase would end the sugar beet industry? Really?

That is not a rigorous analysis, and I am open to any corrections. And I know that $12-$30 price collar increases over time. I can accept the industry may have legitimate calculations involving more factors showing a larger cost impact. But a major point is that we cannot continue to ignore the cost of greenhouse gas emissions. That $12-$30 price is already likely well below the actual social cost of CO2 emissions.

But Berg said if beet producers have pay for carbon credits, the industry will become an "historical anachronism" within two or three decades.

Sorry, but the true "historical anachronism" is allowing unlimited and no-cost emissions of climate change-inducing greenhouse gases. Who says an industry that can only survive with free carbon dioxide emissions ought to even hang around? Such an industry does not sound "world-class efficient" to me. Are we just supposed to say keep dumping all you want since Berg says doing anything else would cost him too much? If some paint companies had said anti-lead regulations would be too costly, would we have allowed continued use of lead based paint? We do not let the oil industry try to claim the Gulf oil-cano is just part of the process of drilling and that they cannot be made to pay for it (at least I think we do not).

A livable climate is more important than sugar from beets at current cost. We have to crank emissions way down and start paying for the privilege of cranking up the climate thermostat and acidifying the oceans. Much better to pay more for beet sugar or for sugar from a different source than warp the climate beyond recognition.

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