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SHAPING STRATEGY Multiple Energy Policy Paths, Same Endpoint Redmond Clark, CBL Industrial Services, Cary, Illinois W


ith the tumult of the mid- term elections behind us, world governments, our federal government and the global economy


are sending the metalcasting industry a number of mixed energy and environ- mental signals. In my last column, I indicated ef-


forts to manage climate change pitted developing nations against developed nations while the energy marketplace was trending towards higher prices. In the weeks preceding the midterm elec- tions, global coal prices surged, and coal company stock prices shot higher. In environmental circles, coal is the dirtiest of carbon fuels, generating more than 2 tons of carbon dioxide for every ton of coal burned, and it is a bulls-eye for climate change activists. Therefore, one might expect stock values—an expres- sion of the future value of a given coal producer—and coal prices to remain static or fall. Why are prices moving up? The answer is in the developing na-


tions, whose appetite for more energy resources is astonishing. Earlier this year, the president of Peabody Coal noted that global coal demand is begin- ning a 30-year “super cycle” of growth, a trend in direct opposition to those trying to restrict demand in order to minimize the expected effects of man- influenced climate change. China has received a lot of press for developing its renewable energy resources, but its progress has been dwarfed by its growth in carbon fuel consumption: the country now consumes half of the world’s coal production. The U.S. owns about one-third of world coal reserves, while China owns about 12%. China is now a net importer of coal and buying heavily on the international markets. Spot prices for coking coal have al-


most tripled since the bust in 2008, and thermal coal is expected to approach three times the 2009 price in the next year or so. The message? Especially in the developing nations, economic growth now is more politically impor- tant than environmental management to


MODERN CASTING / January 2011


avoid potential problems in the distant future. Carbon fuels are still king.


A Second Summit The Copenhagen Climate Summit


ended badly for those hoping to reach a worldwide accord to reduce carbon fuel use. The midterm elections accelerated the trend away from car- bon fuel use regulation in the U.S., as a number of incoming legislators have taken a “jobs first, energy independence second, climate change third” position on their legislative agendas. But this issue is far from dead. The follow-on climate change summit in Cancun, Mexico, just concluded. In a surprising turn of events, the summit reached an agreement on next steps in developing a global climate accord that limits carbon fuel use. The agreements include national promises to reduce greenhouse gas emissions, third-party verification of emissions rates and developed nations’ commitments to fund developing nations’ adaptation to climate change. This agreement lays the groundwork for an even larger accord, possibly as early as next year.


Bringing the Message Home


It helps to remember the Obama Administration’s goal and promise to the international community: a re- duction of domestic greenhouse gas emissions to 17% below 2005 levels by 2020. Because of the stinging political setback at the midterm elections, many democrats acknowledge that “cap and trade” is dead. But President Obama recently observed that there are “many ways to skin that cat.” John Holdren, a lead science advisor to


the president, recently said, “I expect EPA will be moving to regulate greenhouse gases…We would have preferred to get it done with legislation that put a price on greenhouse gas emissions. That didn’t happen. We still expect it will happen in


the future. In the meantime, the regulatory approach is one of the tools at hand, and I expect it will be used.” Indeed, EPA is moving ahead with


If the president’s model becomes law, metalcasters will be paying more and have less access to carbon fuels.


plans to implement a phased cap-and- trade type policy in selected portions of the U.S. economy beginning in 2011. In early December last year, the D.C. Circuit, Court of Appeals turned down a request to grant a stay in upcoming EPA greenhouse gas emission regulations, so large- generator regulations will be effective next month. The outcome is still uncertain, because the ultimate origination of any EPA funding (the House of Representa-


tives) is now held by Republicans who have vowed to stop such regulations unless enacted by Congress. That may sound like good news for manufacturers of metal castings, but take a moment to consider your longer- term energy supply options: If the president’s energy manage-


ment model becomes law, all metal- casters will be paying more per unit of energy supply and have less access to carbon fuels. If we focus first on energy self-suffi-


ciency, exploitation of domestic carbon fuel resources likely will increase the costs of both oil and coal-derived liquid fuels. If we continue with no domestic energy


policy, global carbon fuel demands are going to outstrip inexpensive production options, thus driving energy prices higher whether the government acts or not. Is there a take-home message for do-


mestic metalcasters? Likely, governmental policies and the energy markets may take us down different paths, but they all have the same endpoint: substantially higher energy prices, with risks of limited access to those fuels. At the time this column was put to bed,


NASA just announced that 2010 was the hottest year in recorded climate history. MC


Redmond Clark is president and CEO of CBL Industrial Services, Cary, Ill.


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