Corporate America is starting to line up on both sides of the new energy bill working its way through congress, as the industry weighs the benefits and costs of the proposed system to control greenhouse gas emissions. The American Clean Energy and Security Act of 2009, as it is harmlessly called, has generated controversy since hints of what it might contain started leaking out at the beginning of the year. When the text of the legislation was released, the controversy heated up even more. (For more, see Five Companies Leading The Green Charge.)

IN PICTURES: Eight Ways To Survive A Market Downturn

The crux of the issue has to do with the allocation of allowances for carbon emissions that are being given away for free to those industries that produce pollution. The refiners are only being given 2% of the emissions while the electricity generation industry gets 35%. Industries that don't have enough allowances will have to purchase them in the marketplace. Critics say that these allowances are not being given out in proportion to the amount of pollution that each industry produces.

Conoco Phillips (NYSE:COP) is an integrated oil company that owns refining and other energy related assets. The company criticized the bill in a statement released last week, "U.S. refiners will be bearing the cost for roughly one-third of the nation's greenhouse gas emissions but only receiving 2 percent of the total allowances under the current proposal. It is likely that refiners will not be able to pass along 100 percent of the costs of securing allowances." Conoco said that the refining industry is being unfairly tagged with the emissions associated with the consumption of transportation fuels.

On the other hand, NRG Energy (NYSE:NRG), which has 24,000 megawatts of electricity generation capacity, is quite pleased. The company praised the bill sponsors for their "leadership and willingness to seek pragmatic solutions to tough issues." Edison International (NYSE:EIX) also supports the legislation. The company said that it would lead to "reductions in greenhouse gas emissions while minimizing disruptions to our economic recovery." Edison is a power generation that operates through two subsidiaries - Southern California Edison, a regulated utility, and Edison Mission Group, a competitive power business. (For more, see The Industry Handbook: The Utilities Industry.)

Companies that do not have enough allowances are not stuck with buying excess allowances; they can try to reduce those emissions. Dynegy (NYSE:DYN) said during its recent conference call that it had reduced emissions of other pollutants by installing scrubbers at its facilities. Exxon Mobil (NYSE:XOM) recently built a facility to generate power at a refinery it owns in Belgium. The company said that the facility would remove 200,000 tons of emissions per year, or the equivalent of 90,000 cars.

The Bottom Line
President Obama and the accompanying support of strong majorities of Democrats in Congress make it likely that the American Clean Energy and Security Act of 2009 will become law. Corporate America is split as it lobbies to try to influence legislation that will impact its profitability for years to come. (For more, see The Industry Handbook: The Oil Services Industry and Oil And Gas Industry Primer.)

Related Articles
  1. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  2. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  3. Economics

    The Truth about Productivity

    Why has labor market productivity slowed sharply around the world in recent years? One of the greatest economic mysteries out there.
  4. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  5. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  6. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  7. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  8. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  9. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  10. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
RELATED FAQS
  1. Do plane tickets get cheaper closer to the date of departure?

    The price of flights usually increases one month prior to the date of departure. Flights are usually cheapest between three ... Read Full Answer >>
  2. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center