Feedstock Extraction Transportation and Preparation

In addition to the increased energy costs driven by the power sector, the preparation of feedstock used for chemical production is also energy intensive which results in a high level of direct emissions associated with the refinery cracking process. Approximately 4% of the world's oil and equivalent fossil fuels are used as feedstock for plastics and chemicals [19].

Under an emissions capped economy, the inclusion of carbon pricing on this segment of the supply chain is likely to increase chemical production costs, especially under a scenario of taxation or auctioning of emissions allowances. While oil and coal are globally traded commodities, refined feedstock such as naphtha are significantly less exposed to international markets and therefore more likely to transfer carbon costs to the petrochemical industry. For example, under a carbon pricing scenario of 20 € per tonne of CO 2- the petrochemical industry experiences a price increase of approximately 8€ per tonne of naphtha.18) Naphtha obtained from crude oil refineries represents approximately 75% of the feedstock used for ethylene production in Western Europe [20].

It is estimated that feedstock will represent the largest cost increase for certain products, and a study conducted by the Plastics and Chemicals Industries Association of Australia estimates that carbon pricing on feedstock will have four to five times more impact on the chemical industry than carbon pricing on electricity.

It is also important to consider the feedstock route and whether they are derived from gas, oil, ethane, coal, or biomass. When examining the energy consumption

16) The spark spread refers to the theoretical gross margin of a gas-fired power plant from selling a unit of electricity, having bought the fuel required to produce this unit of electricity. The clean spark spread refers to the spread indicator which includes the price of carbon allowances.

17) The dark spread refers to the theoretical gross margin of coal- fired power plants from selling a unit of electricity, having bought the fuel required to produce this unit of electricity. The clean dark spread refers to the spread indicator which includes the price of carbon allowances.

18) Assuminganemissionsfactorof 0.4051 CO2 to produce 1 tonne of naphtha.

of each feedstock route compared to conventional route which uses oil or ethane in the production of high value chemicals (HVC), methane-based routes are 30% higher while coal and biomass)based routes are 60-150% higher. However, the total CO ) emissions of conventional and methane based routes have a similar intensity of 4-5 tonnes CO ) per tonne of HVC. Coal) based routes produce the highest quantity of CO 2 ranging from 8-11 tonnes of CO 2 per tonne of HVC. Preliminary research discovered that biomass-based routes range from 2 to 4 tonnes of avoided CO2 per tonne of HVC depending on the source of the biomass and whether combined heat and power (CHP) maximizes efficiency [21].

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