Washington (Platts)--8Apr2008

Climate policies that would weaken the US economy are especially wrong in
light of Federal Reserve Chairman Ben Bernanke's remarks last week that the
nation is likely in a recession, a Republican staff member of the Senate
Energy and Natural Resources Committee said Tuesday.

"Global climate change must be met globally," said Frank Macchiarola, the
Republican staff director, said in a panel discussion at the Energy
Information Administration's 2008 Energy Conference in Washington.

Macchiarola said that the climate change bills currently before Congress
share two common themes: "neither require reductions from our global
competitors, [because] they can't do that," he said, and "they [will] have a
negative impact on our gross domestic product."

He said that in 1997, a bipartisan group of senators unanimously
passed a resolution that the US should not sign any climate change deal that
would harm the US economy. The fact that the US economy is now likely in a
recession, he added, "should only strengthen the Senate's [earlier] resolve."

David McCarthy, Republican chief counsel on the House Energy and Commerce
Subcommittee on Energy and Environment, agreed with Macchiarola that resolving
climate change should be an international effort.

"China has to be on board," he said. "I think that's the toughest nut to
crack. A Senate bill [on carbon] could provoke a trade war with China that
could have a serious effect on our economy."

McCarthy said proposed climate-change legislation "could raise the cost
of energy" that would close off certain technology and manufacturing options.
McCarthy noted the impact of higher energy prices on fertilizer factories,
saying that it is projected that the US could, as a result, become more
dependent on "unstable international sources" for food than it is for energy."

John Shanahan, former senior counsel of the Senate Environment and Public
Works Committee who just left to become senior vice president of the Hawthorn
Group, said that even if the US passes a climate bill "without China taking
aggressive action... the concentrations...will go up and go up over 70%," he
said.

"They're the story, we're the backdrop," he added. "What we do must be
coordinated."

Bob Simon, staff director of the Senate Energy and Natural Resources
Committee saw it differently, saying that energy costs are going to rise
whether or not a climate bill is passed.

"Energy costs are going to go up no matter what we do because we don't
have a cushion [of energy supply], so if we don't do anything, the price of
energy will go up," he said.

"Will a carbon bill put a price on carbon and make the price go higher?
Yes it will. Will it ruin our economy? No it won't."

--Valarie Jackson, valarie_jackson@platts.com