Carbonomics: Introduction to Carbon Pricing, Regulations, and Frameworks

Chemical engineers who develop sustainable technologies or manage sustainability programs should be aware of the economics, regulations, and frameworks surrounding carbon.

Designing, operating, and improving production processes are core competencies of chemical engineers. In the past, when evaluating alternative plant designs or looking for process improvements, the price of feedstocks, utilities, and other operating expenses, as well as capital costs of necessary process equipment, guided chemical engineers in making decisions. Increasingly, consumers, investors, and government agencies demand that the greenhouse gas (GHG) emissions — often called a carbon footprint — associated with industrial processes, utilities, and other upstream and downstream activities be considered.

Chemical engineers as well as experts from other fields will now need to weigh the carbon footprint of different potential feedstocks to determine whether a more expensive, but lower carbon, feedstock would be more economical overall. They may need to consider the associated methane leakage (and hence global warming potential) of natural gas produced at different locations or the impact of the use of low-carbon fuels like hydrogen. Furthermore, the source and required volume of steel and cement for construction, which are produced in energy- and GHG-intensive processes, may warrant consideration. Finally, the value of the generated product may in part be determined by whether customers perceive the product as “green” or “low carbon,” as such characteristics may carry a premium.

Carbonomics, while not a strictly defined term, refers to the economic consideration around the avoidance, generation, release, capture, sequestration, and utilization of carbon. However, carbonomics cannot be sufficiently addressed by any single economic, scientific, or engineering discipline because it is based on the complex interconnections between many domains. This creates a challenge for companies seeking to adopt a methodology to price and document carbon emissions and reductions in a field where multiple disparate groups have differing nomenclature and accounting methods.

Creating equivalencies between widely varying techniques aimed to achieve the same objective is one such challenge. For carbon sequestration, carbon dioxide (CO₂) can be injected into deep wells where it would presumably remain for hundreds if not thousands of years. At the same time, carbon can also be absorbed in forests, mangroves, and soils where it might stay for a hundred years, a thousand years, or just a few years if a fire or other disturbance releases the carbon back to the atmosphere. Is the value of all sequestration equivalent? If not, how can we price the differing values or account for the risk of loss back to the atmosphere through leakage or disturbance?

The answers to these questions are at present determined by accounting practices associated with industry-relevant regulations and frameworks (e.g., the Task Force on Climate-Related Financial Disclosures). However, the rapidly changing scientific understanding of carbon accounting and what methods and technologies are most effective for removing carbon from the atmosphere are evolving in real time, which can create challenges for engineers, businesses, regulators, and stakeholders.

This article introduces lifecycle assessments (LCAs) as a tool to evaluate and quantify carbon footprints. It discusses carbon regulations and frameworks, and provides an overview of how these regulations and frameworks can relate to carbon pricing...