Benchmarking Creating a Level Playing Field for Carbon Allocations. ERTC Sustainable Refining Conference Brussels April 2, 2008

Transcription

1 Benchmarking Creating a Level Playing Field for Carbon Allocations ERTC Sustainable Refining Conference Brussels April 2,

2 Solomon Associates Who We Are Solomon has benchmarked energy industry performance for more than 25 years extensive proprietary worldwide database Petroleum refining and petrochemicals industries Pipelines and terminals Power generation Strong focus on energy efficiency has resulted in expanding products and services to GHG Energy and GHG emissions efficiency now linked Allocation of GHG allowances 2

3 Solomon s Global GHG Activities Regulatory Intensity Metrics/Allocation Methods Intensity Metrics Refining Canadian Petroleum Products Institute (CPPI) Olefins European Chemical Industry Council (CEFIC) and the Association of Petrochemical Producers of Europe (APPE) Allocations Refining UK Department of Trade & Industries (DTI) Refining Western States Petroleum Association (WSPA) in California (including intensity metrics) 3

4 The Benchmarking Challenge Framing the Global Issue Regulatory Objectives Equity Simplicity Equity Industry Objectives Strike a reasonable balance between simplicity of a benchmarking method and equity in distributing the burden of compliance Simplicity Equity 4

5 Guiding Principle Everything should be as simple as possible, but not simpler. Albert Einstein Application The quest for simplicity in methodology should not override the primary objective of achieving equity 5

6 Benchmarking Methodologies Key Design Objectives Simplicity Fewest variables without sacrificing accuracy Consistent across EU-27 harmonised rules Meet transparency requirements Equity Reliably differentiates performance Awards early action Penalises non-action 6

7 Benchmarking Methodologies Other Design Objectives Incentives to reduce emissions Install carbon efficient technologies Improve energy efficiency Switch to lower carbon-intensive fuels Reduce flaring Dual functionality Intensity metric efficiency assessments, target setting, and tracking Allocations methodology 7

8 Major Driver Refining Complexity Wide Range of Configurations Complexity relative processing intensity the amount of resources required to upgrade raw materials to finished products Solomon s definition Complexity-Weighted Complexity = Capacity (EDC*) Crude Capacity EU-27 complexity range 5 to 15 (average ~9) CO 2 emissions per barrel for low vs high complexity refineries in EU-27 also factor of 3 * Solomon s s proprietary metric Equivalent Distillation Capacity (EDC) 8

9 Intensity Metrics Simple vs Comprehensive Simple CO 2 per barrel of input Weak correlation with actual emissions Does not account for complexity Comprehensive CO 2 per complexity-weighted barrel Solomon s historical EDC metric correlates better than simple barrels, but not a strong proxy for GHG EDC factors based on operating expense intensity Solomon s new complexity-weighted barrel (CWB TM metric based on GHG intensity strong correlation TM ) 9

10 Solomon s New CWB Metric Designed for Regulatory Purposes CWB Methodology Process Carbon Equivalent (PCE TM ) factors developed for major processing categories/non-process facilities Based on industry-average performance standards Refinery CWB = Σ Unit Input i (or Product i ) * PCE i CWB can be streamlined or customised to meet regulatory requirements for simplicity Consolidation of PCE factors Assessment of accuracy trade-offs 10

11 Dual Role of Benchmarking Method Intensity Metric & Allocations Methodology Intensity metric = MT of CO 2 per CWB Intensity metric s divisor sets basis for allocations Refinery Allocation, % = % of industry s total CWB Example: refinery with 2% of the industry s total CWB would receive 2% of the allowances Method Overview Applicable on EU-wide harmonised basis Awards early action Encourages emission reductions 11

12 Summary Solomon has worked extensively over the past 5+ years to develop new benchmarking tools Assist refineries in managing GHG performance Support the industry in addressing regulatory issues Solomon provides customised solutions Helps industry and regulatory agencies work together to strike a reasonable balance between simplicity and equity, thus Creating a Level Playing Field for Carbon Allocations 12

13 Solomon Contact Information Bill L. Trout Global Climate Change Director Two Galleria Tower Suite Noel Road Dallas, Texas Phone: Fax: Cell: