Almost unnoticed in the sweeping energy bill enacted late last year was a provision that restricts federal government agencies from purchasing fuel that has greenhouse gas emissions (GHG) in both production and use that are greater than emissions from conventional petroleum sources. According to the Financial Times (February 16/17), that rule could lead to trade disputes with Canada because of its energy-intensive extraction of oil from tar sands.
Here’s the text of the provision in the “Energy Independence and Security Act of 2007”:
No Federal agency shall enter into a contract for procurement of an alternative or synthetic fuel, including a fuel produced from nonconventional petroleum sources, for any mobility-related use, other than for research or testing, unless the contract specifies that the lifecycle greenhouse gas emissions associated with the production and combustion of the fuel supplied under the contract must, on an ongoing basis, be less than or equal to such emissions from the equivalent conventional fuel produced from conventional petroleum sources.
Under World Trade Organization rules, a country can enact measures to protect human, animal, or plant health and to protect natural resources as long as they are not “applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade.”
The U.S. law applies to fuels produced both in the U.S. and other countries, but some trade experts argue that it could be interpreted as discriminatory because its impact would be disproportionate on some countries.
If a dispute does arise, it could put the U.S. in a dicey situation, as other countries, including the European Union, have threatened to levy carbon taxes on imports. It would be difficult for the U.S. to defend its position re the energy bill, while opposing other countries’ ability to enact such provisions.
Another twist to this provision: its impact on biofuels, such as corn-based ethanol. Some experts have said that ethanol production consumes much more fossil energy than it produces. Do ethanol’s GHG emissions in its production and use exceed those of conventional fuel, and, if so, what happens to all the ethanol subsidies and mandates for its use by federal agencies?