Impact of Carbon Cap and Trade on Refinery Conservation Economics

A program directed at the reduction of green house gas (GHG) emissions has been the object of increased focus in US public policy. This is evident by the House of Representatives passing The American Energy and Security Act (H.R. 2454) in June 2009 and the EPA actively pursuing ways in which the Clean Air Act can be used to reduce GHG as a result of their determination that GHG is an endangerment to human health and welfare. In H.R. 2454 individual refiners would be responsible for GHG emissions from their manufacturing operations plus the emissions from the combustion of the fuels they sell. These total emissions represent about 35% of the total US GHG inventory; however in H.R. 2454 the refining sector is given 2% of the available emission allowances per year until 2025. This will result in refiners having to either purchase or find offsets for over 90% of their regulated GHG emissions.

As a result of a carbon constrained economy there are likely to be significant incentives to implement energy conservation projects that are marginal or uneconomic based only on the value of fuel savings. In this paper several case studies will be presented where refinery energy conservation options will be considered with the economics for GHG emissions reductions included. A sensitivity analysis on the value of the carbon credits will be included in the economic evaluation.