Managing the Regulatory Environment

Nathan Steeghs

2.1 Introduction 57

2.2 Overview of Climate Policy 59

2.2.1 Economics of Climate Change 59

2.2.2 Policy Measures to Mitigate Greenhouse Gas Emissions 59 Cap-and-Trade 59 Command-and-Control 61 Hybridization of Taxation and Trading 62

2.3 Carbon Compliance for the Chemical Process Industry 63

2.3.1 Carbon Pricing and Industry Exposure 63

2.3.2 Applying Carbon Pricing to the Chemical Production Chain 64 Electricity Generation and Supply 66 Feedstock Extraction, Transportation, and Preparation 67 Basic Chemical Preparation 68 Subsector Chemical Preparation 70

2.3.3 Opportunities within a Compliance Market 71

2.4 Carbon Offsetting in the Chemical Industry 71

2.4.1 Concept of Offsetting 71

2.4.2 Flexible Mechanisms of the Kyoto Protocol 72 Developing a CDM Project 73 Developing a JI Project 80

2.4.3 International Offsetting in a Post-2012 Context 81 Scaling up the CDM via Benchmarking 81 Sectoral Crediting Mechanisms (SCM) 82

2.5 Positioning Industry for a Global Framework on Climate Change 82

2.5.1 Defining Sectors within a Regulated Environment 83

2.5.2 Allocating for the Chemical Industry 84

2.5.3 Key Messages Moving Forward 85 References 86

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