Carbon regs will hit some communities hard

Alcoa announced this week that it is shuttering aluminum smelting operations in Ferndale and Wenatchee. Those communities are about to take an economic hit. The worst part is, no one knows how long the stoppage will last – or if those plants will ever re-open.

The closures are due to depressed global aluminum prices, not any specific problems with the Ferndale or Wenatchee operations. Gov. Inslee’s proposed carbon rules are also not relevant – to the cause of the closures, at least.

Added costs make re-opening less likely
The potential carbon regulations are relevant to the question of whether these plants will re-open when aluminum prices rebound, returning good-paying jobs to these two areas. A company spokesman told the Bellingham Herald, “The decision to restart the operations would include a series of factors, ranging from global market conditions, regulatory certainty, capital investments, energy pricing and alignment with Alcoa’s strategy to create a globally competitive commodity business.”

As Todd Myers of the Washington Policy Center points out, Inslee’s carbon regulations will directly affect energy prices and regulatory certainty. Myers also estimated the costs to the plants to reach targeted carbon levels:

To meet those targets, Alcoa will have to pay to reduce emissions. In California, carbon permits cost about $13 per ton, annually. Above that price, emitters would simply reduce their own emissions rather than buying a permit.

Based on those calculations, Alcoa’s plants are looking at an additional cost to meet the 2020 targets amounting to:

  • Wenatchee – $650,000 annually
  • Ferndale – $2,278,000 annually

Those costs increase as the targets become more strict beyond 2020. If the prices go up to $30 per ton, as predicted in California, those costs go up to $1.5 million annually in Wenatchee and $5.25 million annually in Ferndale.

A real discussion involves benefits and costs
That alone does not mean the carbon regulations are a bad idea, but it’s frustrating to see these kinds of regulations discussed as if they’re all upside, no downside. As Myers wrote, “Many in the environmental community have been glib about the cost of climate regulations, simply assuming they can be absorbed.”

Those costs, however, will not be distributed evenly. To, say, a biotech worker in South Lake Union, the costs can be easily absorbed. For a blue-collar worker on the potlines in Wenatchee, the consequences could be much more serious. Some families will bear the burden more than others.

The costs won’t be distributed evenly among communities, either. With its two oil refineries and the Alcoa plant on the list of companies targeted by the proposed carbon regulations, a place like Ferndale could be very hard hit.

Are we serious about keeping manufacturing jobs?
We need to pay more than just lip service to the need to retain good-paying manufacturing jobs. When the decisions government makes imperils those jobs, we must take that seriously. Workers who lose those jobs usually find it very difficult to find a replacement job that pays comparable wages.

And what is the real-world effect of these regulations likely to be, the end of aluminum manufacturing? No, but there will be a further shift of that manufacturing to other countries, where the electricity used is unlikely to come from as clean a source as the Northwest’s hydropower.

So by all means, let’s keep discussing Inslee’s carbon proposals and gathering more information. Let’s also be honest that there will be real costs (ones not easily papered over with skills retraining or “green jobs” programs), and that the costs will be borne disproportionately by some communities that aren’t taking part in Seattle’s economic boom times.
-Rob McKenna

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Rob McKenna
Rob served two terms as Washington’s Attorney General, from 2005 to 2013. He successfully argued three cases before the U.S. Supreme Court and negotiated three of the largest consumer financial protection settlements in national history, all involving mortgage lending and servicing. He is a recognized leader in the development of consumer protections on the internet, in data protection and privacy regulation.