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Conservation economics: Carbon pricing impacts

By Chemical Engineering |

Reduction of greenhouse gas (GHG) emissions continues to be a major issue in national and international public policy, as well as a major focus for companies in the chemical process industries (CPI). Many countries are considering systems that place a price on GHG emissions through a carbon cap-and-trade system, for example. In an environment where GHG emissions have a given price, certain energy conservation measures that may have provided a small or negligible internal rate of return (IRR) based on fuel savings alone will be much more attractive economically as GHG emissions prices increase. Returns from efficiency projects Example calculations that illustrate the impact of GHG emissions prices on the economics of energy efficiency projects are those for calculating the IRRs of several energy-efficiency projects at a hypothetical 150,000-bbl/d petroleum refinery with a range of GHG prices ($0 to $100/metric ton (m.t.) CO2 equivalent). In general, results demonstrate that incorporating the cost of GHG emissions into project economics can improve the attractiveness of previously marginal energy projects. Figure 1. Various energy efficiency projects with costs of GHG emissions included are illustrated here IRRs…
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