Abstract
The overall goal of this study is to consider technology and policy options for the reduction of carbon dioxide (CO2) emissions in the UK petroleum oil refining industry in the context of the UK’s Kyoto Protocol commitment on greenhouse gas emissions in the fight against global climate change. As a consequence, the objectives are to conduct an investigation into the factors affecting CO2 emissions in the industry; to quantify opportunities for making reductions and derive an abatement cost curve; to review the state of policies for delivering reductions; to determine the impact of the cost of carbon; and to propose a strategy, encouraged by economic instruments, for achieving substantial and sustained reductions. This requires a methodology that has involved detailed empirical analyses of emissions at two refineries; operations analyses of these refineries to quantify the opportunities for making energy savings/emissions reductions leading to a representative abatement cost curve for the industry; a review of recent experiences with the European Union Emissions Trading Scheme (EU ETS); an evaluation of the potential impact of the cost of carbon on refining margins and selling prices of gasoline, together with an analysis of strengths, weaknesses, opportunities and threats to assess the long term future of the industry; and a review of current proposals for the EU ETS leading to development of a strategy for the industry to improve energy performance relative to its EU peer group, whilst meeting UK Government targets for emissions reductions. The key conclusions are that the UK refining industry could deliver substantial emissions reductions over a range of negative and positive abatement costs, the EU ETS could be fine-tuned to create an effective cap-and-trade system and there would be benefits from the refineries being subject to differential treatment to encourage both emissions reductions and survival of the fittest.