Evidence is mounting to support the need to better understand and manage carbon liability at a corporate level within the context of climate policy. It is becoming ever more critical for chemical companies to form a corporate position on key issues such as emissions trading, taxation, allocations and border tax adjustments, and to develop general strategies to maximize asset management under a global carbon trading framework.
This chapter examined the key vulnerabilities and opportunities of the chemical industry operating within a regulated environment on GHG emissions. It was revealed that a cap - and- trade can threaten the cost of production for basic and sub- sector products such as PVC, soda ash, calcium carbide, polyethylene, and polypropylene because of their high dependency on carbon intensive upstream inputs such as chlorine and olefins and especially for downstream products that are highly exposed to international trade. While climate policy can incur costs for industry, emissions trading and international offsets offer new revenue streams for the chemical industry which, for example, can deploy waste heat recovery or abate harmful emission from nitric or adipic acid production. Evidence also supports that a price of carbon drives innovation in the chemical industry to develop technology based solutions to climate change such as PV cells and lightweight composites.
The chemical industry must continue to advocate for the inclusion of sector and sub -sector consideration within a cap -and-trade to communicate the risks of products that face market distortion and leakage imposed through climate policy. Options discussed earlier such as benchmark based allocations, opt-in provisions, and international offsets offer a way forward for energy intensive sectors to remain competitive while achieving the overall goal of carbon reduction.
Long term strategies which evaluate the cost of abatement across facilities enable companies to maximize the advantages of emissions trading, particularly where international offsets are available from non-compliant facilities. In regions where biomass is available, further research in the areas of biomass-based routes for high value chemicals which incorporate CHP to maximize energy efficiency will deliver low carbon or carbon negative products to the market. An effective strategy will not only better position companies from climate policy risks but also enable a competitive advantage as more companies fall under compliance obligations. The chemical industry operates at the core of clean technology innovation and will continue to play an integral role towards achieving low carbon solutions in the fight against climate change.
(2006) Competitiveness and Carbon Pricing- Border Adjustments for Greenhouse Policies, The Australia Institute, Manuka.
2 McKinsey & Company (2009) Innovations for Greenhouse Gas Reductions, International Council of Chemical Associations, Brussels, Belgium.
3 Botschek, P. (2008) Short Cefic Position on ETS Review, European Chemical Industry Council, Brussels, Belgium.
4 International Energy Agency (2007) Tracking Industrial Energy Efficiency and CO2 Emissions, IEA, Paris, France.
5 Niederberger, A.A., and Saner, R. (2005) Exploring the Relationship Between FDI Flows and CDM Potential, Transnational Corporations, 14, (1) 1-40.
(2007) Climate Change 2007: IPCC Synthesis Report to the Fourth Assessment Report, IPCC, Geneva, Switzerland.
7 Stern, N. (2006) Part VI: International Collective Action. Chapter 22: Creating A Global Price for Carbon in the Stern Review on the Conomics of Climate Change, H M Treasury, Cambridge, UK.
8 Gehring, M.W., and Streck, C. (2005) Emissions Trading: Lessons From SOx and NOx Emissions Allowance and Credit Systems Legal Nature, Title, Transfer, and Taxation of Emission Allowance and Credits, Environmental Law Institute, Washington DC, USA.
9 The Pew Center on Global Climate Change (2009) Climate Change 101- Cap and Trade, Pew Center on Global Climate Change and the Pew Center on the States, Arlington, VA, USA.
10 Baumol, W.J. (1972) On taxation and the control of externalities. American Economic Review, 62, (3), 307-322.
11 Hepburn, C. (2006) Regulation by prices, quantities, or both: a review of instrument choice. Oxford Review of Economic Policy, 22, 226 - 247 .
12 United Nations Environmental Programme (2000) The Montreal Protocol on
Substances That Deplete the Ozone Layer, UNON, Nairobi.
13 Wilcoxen, P.J., and McKibbin, W.J. (2009) Climate Change after Kyoto: A Blueprint for a Realistic Approach. The Brookings Institution, http://www. brookings.edu/articles/2002/spring_ energy_mckibbin.aspx (accessed 12 October 2009).
14. US Census Annual Survey ofManufac-turers (2006) US International Trade Commission Tariff and Trade DataWeb.
15 Marscheider-Weidemann, F., and Neuhoff, K. (2008) Estimation of Carbon Costs in the Chemical Sector, University of Cambridge , Cambridge, UK .
16 Isted, J., and Long, S. (2008) Carbon Crush. ICIS Chemical Business, (Jul 14: 2008).
17 Ho, M.S., Morgenstern, R., and Shih, J.-S. (2008) Impact of Carbon Price Policies on U.S. Industry, Resources for the Future, Washington, DC, USA
18 EPRI (2006) The Impact ofCO2 Emissions Trading Programs on Wholesale Electricity Prices, Electric Power Research Institute (EPRI), Palo Alto, CA, USA.
19 Plastics and Chemicals Industries Association (2008) Garnaut Climate Change Review. http://www.garnau-treview.org.au/CA25734E0016A131/ Web0bj/D0847678ETSSubmission-Plas-ticsandChemicalsIndustriesAssociation/$ File/D08%2047678%20ETS%20 Submission%20-%20Plastics%20and%20 Chemicals%20Industries%20Association. pdf (accessed 12 October 2009).
20 Enviros Consulting Limited (2006) EU ETS Phase II New Entrant Benchmarks, London, UK.
21 Ren, T. (2009) Petrochemicalsfrom Oil, Natural Gas, Coal and Biomass: Energy Use, Economics and Innovation, Utrecht University, Utrecht, Netherlands.
22 Euro Chlor (2008) Revision ofthe EU ETS-Electro Intensive Sectors - Inclusion and Carbon Leakage Exposure Criteria, EuroChlor, Brussels, Belgium.
23 CAN - Europe ( 2009 ) Emission Trading in the EU. http://www.climnet.org/
EUenergy/ET.html (accessed 12 October 2009).
24 ClimateBiz Staff (2009) ClimateBiz. Carbon Market Worth. http://www. climatebiz.com/news/2009/01/11/ carbon-market-worth-118b-2008 (accessed 23 October 2009).
25 UNFCCC (2009) The Mechanisms under the Kyoto Protocol: Emissions Trading, the Clean Development Mechanism and Joint Implementation. http://unfccc.int/ kyoto_protocol/mechanisms/items/1673. php (accessed 5 October 2009).
26 Perspectives Climate Change (2007) Perspectives: Providing a full toolbox to meet your CDM/JI challenge. http:// www.perspectives. cc/ C D M - JI -proj ect-manag.61.0.html (accessed 13 October 2009).
27 Fenhann , J. ( 2009 ) Overview of the CDM pipeline (Excel sheet), UNEP Ris0e Centre, Roskilde, Denmark.
28 UNFCCC ( 2009 ) UNFCCC. Approved Baseline and Monitoring Methodologies. http://cdm.unfccc.int/methodologies / PAmethodologies / approved.html (accessed 12 October 2009).
29 World Bank Carbon Finance Unit (2009) Carbon Finance Unit. Methodologies Database.
30 UNFCCC (2009) UNFCCC. Guidance-Project Design Documents. http:// cdm.unfccc.int/Reference/Guidclarif/ pdd/index.html (accessed 12 October 2009).
31 EIB (2005) Clean Development Mechanism for Energy Sector. Project Design Phase. http://cdm.eib.org.my/ subindex.php?menu=8andsubmenu=80# PDD (accessed 12 October 2009).
32 Fenhann, J., Halsnss, K., Pacudan, R., and Olhoff, A. (2004) CDM Information and Guidebook, UNEP Ris0e Centre, Roskilde, Denmark.
33 Foundation for International Environmental Law and Development (FIELD) (2009) The CDM project cycle. http:// www.cdmguide.net/cdm15 .html (accessed 16 October 2009).
34 UNFCCC (2009) CDM Projects. http:// cdm.unfccc.int / Proj ects / D B / S G S -UKL1195477297.02/view (accessed 21 October 2009).
35 Lomas, O., Townsend, M., and Tredgett, R. (2009) The Chemicals Sector and the EU Emissions Trading Scheme after 2012, Allen & Overy, London, UK.
Was this article helpful?