The U.S. metalcasting industry is integral to our nation's clean energy future. We are the foundation for most other manufacturing operations and specifically provide cast components for the renewable energy sector and transportation. U.S. metalcasters produce the castings that are used in wind turbines, solar towers, gas turbines, geothermal power pumps, lightweight automobiles powered by all means of alternative fuels, trucks and agricultural equipment.

At the same time, the necessity to melt metal at extremely high temperatures in the casting process makes our industry one of the top ten most energy-intensive industries in the U.S. As a result, a climate bill will have a significant direct impact on metalcasters due to program compliance costs and higher energy costs passed through from other regulated sources. This impact will be further exacerbated by the fact that competing metalcasting facilities around the globe, including China and India, will continue to operate free from greenhouse gas (GHG) regulatory burdens.

The metalcasting industry understands the importance of reducing the world's carbon footprint and working towards a clean energy future. However, it is imperative that a climate bill not undercut our ability to operate competitively in the global marketplace. To do so would result in what is commonly known as "carbon leakage." This phenomenon occurs when GHG-limiting programs cause metalcasters to move overseas where processes are less energy efficient than in the U.S. In addition, castings would have to be shipped to the U.S., causing an increase in GHG emissions from the added transportation. Our nation's metalcasting industry would be decimated, causing an increase in global emissions-a loss for the environment and a loss of well-paid jobs in your state or district.

The American Foundry Society (AFS) is making progress in advocating for a positive solution that would permit ferrous and nonferrous metalcasters to be included in the energy rebate provisions for Energy-Intensive and Trade-Exposed (EITE) industries, similar to the provisions in the House-passed cap-andtrade bill (H.R. 2454).

Congress, energy advisors to the President, the U.S. Department of the Treasury, and the U.S. Environmental Protection Agency (EPA) understand it is imperative that metalcasters qualify as an "eligible industrial sector" to receive rebates for compliance and increased energy costs under a climate proposal. For example:

• The December 2009 Interagency Report on Competitiveness and Emission Leakage cited the lackof trade data in the International Trade Commission (ITC) database as a flaw in failing to include the metalcasting industry in the energy rebate.
• In the April 2010 letter to Sens. Kerry, Lieberman and Graham, a group of ten industrial-state Senators stated that legislation must provide a "air and balanced"solution for metalcasters to receive rebates to cover increased energy costs under a climate program.
• Amendment language to specifically fix the trade data problem for all metalcasting sectors is gaining traction with key Senate offices.

AFS and metalcasters across our nation urge Congress to support climate change provisions that ensure both ferrous and nonferrous metalcasters are eligible for energy cost rebates. Without a specific provision to ensure that metalcasters qualify for energy allowances, a climate bill would dramatically increase domestic energy prices and drive casting facilities and jobs offshore.

All Metalcasting Sectors-Ferrous and Nonferrous-Must Receive an Energy Cost Rebate

The current EITE eligibility criteria in H.R. 2454 is a "one-size-fits-all" calculation that does not provide an adequate picture of the unique competitive challenges our industry faces. AFS maintains that ferrous, aluminum and other nonferrous metalcasters must be included with this rebate for the following reasons:

• The aluminum and nonferrous casting market has been experiencing significant growth in the past few years prior to the recession, and any uncertainty in the cost of these castings will cause the industry to move overseas where energy costs are lower.
• A final European Union (EU) Decision Directive stated that the EU aluminum metalcasting sector was subject to a significant risk of carbon leakage and should be eligible to receive energy rebates in the EU Emission Trading System. If aluminum metalcasters are not included in the EITE rebate provisions in a U.S. climate change proposal, this will give EU aluminum metalcasters an unfair competitive advantage.
• Delaying six months or longer to make a subjective "ndividual showing"to the EPA that nonferrous metalcasters should receive the rebates creates uncertainty in the market for domestic nonferrous castings. This will cause the industry' customers to look to metalcasters in other countries for business.
• There are more than 1300 nonferrous metalcasters in the U.S., which represents two-thirds of the metalcasting facilities. To exclude the nonferrous sector from EITE rebates would mean elimination of thousands of high-paying jobs at these facilities.

Furthermore, AFS maintains the following provisions must be included in a climate bill:

• Fully funded allowance program to assist industry with the compliance and increased energy costs associated with a greenhouse-gas limiting program;
• Funding to support the research, development and deployment of low-carbon industrial technologies;
• A significant phase-in for industrial sources of emissions to provide them necessary time to adjust to changing energy markets and to develop and deploy low carbon industrial technologies;
• Pre-emption of U.S. Environmental Protection Agency (EPA) efforts to regulate greenhouse gases under the Clean Air Act.

These provisions are entirely consistent with the public policy advanced by climate legislation. They would permit critical energy intensive industries, like metalcasting, to survive by easing the immediate financial blow of a GHG-limiting program. The U.S. metalcasting industry and its 200,000 employees are depending upon your support to make this happen.

  Support Policies that Strengthen U.S. Manufacturing
U.S. Metalcasting Matters to the Economy and National Security

The U.S. metalcasting industry is vital to our country's economy and national security. As the sixth largest industry in the nation, we provide employment to more than 200,000 men and women directly and support thousands of other jobs indirectly. The industry is comprised mostly of small American-owned businesses, with 80% having fewer than 100 employees. Metalcasters produce thousands of types of castings that are found in more than 90% of all U.S. manufactured goods and equipment. Castings are used by a wide variety of industry sectors including energy, automotive, defense, aerospace, agriculture, medical, municipal, plumbing, transportation and construction-to name just a few.

U.S. manufacturing plays a critical role in our economic future. Still, that future is not without its challenges. The recession coupled with rising external costs represent a fundamental challenge to U.S metalcasters. The costs for corporate taxes, health care and pensions, regulation, natural gas and tort litigation add almost 18% to manufacturers' costs relative to our major trading partners. Furthermore, imported castings now comprise 23% of the market. For many facilities, offshore competition, oftentimes enabled by our own government policies, has been our greatest enemy.

As our nation's unemployment rate continues to linger near 10%, we urge Congress to support policies that accelerate and strengthen manufacturing production here in the U.S by changing key tax, trade and economic policies and making investments in infrastructure, including energy and transportation projects.

• Expand and Make the R&D Tax Credit Permanent-n expanded and permanent R&D tax credit encourages U.S-based firms to channel more R&D activities to the U.S., spurring greater productivity and economic growth. While U.S. R&D tax credits remain temporary (expired on 12/31/09), the majority of other nations have implemented them on a permanent basis.
• Fix the Federal Estate and Generation-Skipping Transfer Taxes-state taxes are fully repealed in 2010. However, the estate tax returns in 2011 with only a $1 million exemption and the full 55% rate. This uncertainty in the law makes it difficult for small-business manufacturers to plan.
• Lower the Statutory Corporate Tax Rate-he U.S. statutory corporate income tax has remained at roughly 40% (federal rate of 35% plus the average state rate of 4.7%) for the past 20 years. That tax rate is second-highest among OECD countries today, trailing only Japan.
• Hold China and Other Countries Accountable for Currency Manipulation-urrency manipulation puts American manufacturers at an unfair disadvantage making Chinese goods significantly less expensive. China's currency is undervalued by as much as 40% and is a big reason for the huge U.S. trade deficit.
• Prohibit Use of Stimulus Funds for Projects Utilizing Foreign Manufacturing Components-or example, $1.6 billion in U.S. Department of Energy stimulus grants for clean-energy projects went to companies based outside of the U.S.1 even though U.S. metalcasters produce castings for wind turbines-from the frames and gearboxes to the hubs. Scarce U.S. taxpayer dollars should be used to create and retain domestic manufacturing jobs.

Congress must work to preserve, enhance and advance U.S. global competitiveness and leadership in this most vital of economic sectors. A strong, efficient and innovative U.S. manufacturing base is essential to our country's economic future in a competitive world environment.