A new study by Wood Mackenzie, the consultancy, confirms what others have warned about in recent months and takes it one step further: The carbon legislation being considered by Congress is more onerous than that in Europe and could threaten the sustainability of the US refining industry. Alan Gelder, Wood Mackenzie’s head of global downstream oil consulting, said, if passed into law, the legislation could cost US refiners US$100bn per year.
That is because they will be required to purchase carbon emission credits for both stationary emissions – from the refineries themselves – but also emissions from the subsequent combustion of the fuels. Gelder says the US draft legislation is much more onerous on the US refining sector than its European counterparts.
He explains that the free allocation of allowances for the US refining sector equates to less than 5 per cent of total carbon emissions from the production and consumption of transportation fuels in the US – or about 100m tons in 2015. The inclusion of consumption emissions, combined with a lower free allocation of credits, will mean US refiners must purchase around 2bn credits in 2015. Given the carbon emissions reduction goals set by both the House and Senate climate bills, Gelder says carbon will have to be priced at $50 a ton, or even higher, in any final legislation.