Kyoto Accord Could Cost Truckers Billions, DOE Says
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A British consulting firm says the Kyoto targets are The agreement, which was negotiated in Kyoto, Japan, last year, could cause diesel prices to rise to between $1.33 and $2 per gallon from the current $1.04 average, and gasoline to increase to between $1.39 and $1.91, according to the Energy Information Administration.
The Kyoto agreement commits the approximately 150 nations that signed it to reduce carbon dioxide and other so-called greenhouse gases in 10 to 15 years, in a concerted drive to curb global warming. Under the pact, the U.S. would have to reduce greenhouse gas emissions to 7% below its 1990 levels between 2008 and 2012.
Carbon dioxide, the most prevalent of six gases that scientists believe contribute to global climate change, is emitted by heavy-duty trucks, automobiles and other burners of fossil fuels as a natural part of the combustion process.
The EIA produced six different economic models showing the potential impact of the agreement in the year 2010, and concluded it would cost the U.S. between $77 billion and $348 billion a year to comply. It found that electricity prices would rise between 20% and 86%, and that coal and natural gas prices would also skyrocket.
If the agency’s estimates are on track, the Kyoto accord will “have a tremendous effect, far greater than any of us could imagine,” said Edward H. Arnold, chairman and CEO of Arnold Industries, Lebanon, Pa. “You would have to raise freight rates by 15% to 20% just to cover diesel, and that’s conservative,” he said.
Mr. Arnold estimated that fuel represents 15% of his operating costs. “Fuel is the lifeblood of our industry,” he said.
The Kyoto agreement, not yet ratified by the U.S., has pitted conservationists against those who feel there is not enough scientific evidence to support claims by some scientists of an industrial contribution to global warming. The extent to which industry exhaust causes global warming is the subject of much debate.
The treaty has run into trouble in Congress, where opponents are arguing that it could severely hamper the economy. Ratification requires the approval of two-thirds of the U.S. Senate.
“I’ve suspected all along that the White House position on the Kyoto protocol is unrealistic and untenable, and this study confirms my suspicions,” said Rep. James Sensenbrenner Jr. (R-Wis.), chairman of the House science committee.
Susan Holte, the EIA’s director of integration and demand, said the agency wasn’t trying to pick sides in the fight. “We just do the research we’re instructed to conduct. We don’t necessarily reflect the administration’s views.”
Negotiators from around the world are scheduled to meet in Buenos Aires, Argentina, in November to start ironing out the details of the tentative accord.
Because trucking is “a pennies business, if diesel goes up that high, regardless of the reason, it would make it hard for motor carriers to make their returns,” said Robert G. Rothstein, general counsel for the Truckload Carriers Association. “So much of the economy is premised on energy costs, the economy would suffer.”
Several trucking executives said they would likely be forced to turn to shippers for help — in the form of surcharges — if diesel prices reach the levels forecast in the study.
Edward M. Emmett, president of The National Industrial Transportation League, the nation’s largest shippers’ association, said 2010 is far enough in the future that his group hasn’t studied the EIA’s report. “It’s obvious that drastic diesel prices would increase the cost of moving products. Beyond that I don’t know,” he said.
Bill Huie, assistant vice president of corporate transportation at NCH Corp., Irving, Texas, and chairman of NITL’s highway committee, said there are no “free lunches, that much we do know.”
If the cost of fuel increases, so will the cost of distribution, and that’s going to come out on the shelf,” Mr. Huie said. “It would have a devastating effect on the economy.”
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