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Over the Hills and Far Away - Greenhouse Gases and the Refining Industry

Over the past couple years of energy market turbulence, pretty much everyone has come to acknowledge that the U.S. — and the rest of the world — will continue to require refineries and refined products for decades to come. It’s also likely, though, that U.S. refiners, like their European counterparts, will be required to do more to reduce the volumes of carbon dioxide (CO2) and other greenhouse gases (GHGs) generated during the process of breaking down crude oil and other feedstocks into gasoline, diesel, jet fuel and other valuable products. And, thanks to new federal incentives, it might even make sense for refineries to capture and sequester at least some of the CO2 they can’t help but produce. In today’s RBN blog, we begin a series on refinery CO2 emission fundamentals, the differing policies that are applied here in the U.S. and abroad, and how those policies might ultimately influence refining competitiveness.

It will come as no surprise that the refining industry generates significant volumes of GHGs, including CO2, from both the refining processes themselves and the fossil fuel consumption needed to power them — just consider the vast amounts of heat that need to be generated for distillation and other reactions that need to occur. It’s equally unsurprising that the refining industry — not to mention the separate-but-related transportation sector, which depends heavily on refined fuels — has been coming under increasing scrutiny regarding GHGs.

As we’ll discuss in more detail later in this series, the regulation of GHG emissions from refineries is still a work in progress here and in other parts of the world where strategies aimed at mitigating emissions vary widely in scope and efficacy. As we’ve recently detailed in previous blogs on the topic, the U.S. federal government has mainly attempted to reduce GHG emissions through indirect methods: the Renewable Fuel Standard (RFS) and various energy-efficiency programs as well as the adaption of prior legislation —  the Clean Air Act and Corporate Average Fuel Economy (CAFE) standards, among them — most of which are aimed at reducing demand for refined products and, by extension, reducing the amount of refined products that need to be produced. The one federal regulation that directly impacts refiners is the GHG Reporting Program (GHGRP), which since 2010 has required about 8,000 industrial and other entities that emit over 25,000 metric tons (MT) annually to report their emissions. This regulation, which helps quantify the scope of emissions, is a likely first step toward more informed rulemaking.

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