Carbon Emissions from U.S. Ethylene Production under Climate Change Policies

This paper presents the results from a dynamic computer model of U.S. ethylene production, designed to explore implications of alternative climate change policies for the industry's energy use and carbon emissions profiles. The model applies to the aggregate ethylene industry but distinguishes its main cracker types, fuels used as feedstocks and for process energy, as well as the industry's capital vintage structure and vintage-specific efficiencies. Results indicate that policies which increase the cost of carbon of process energy-such as carbon taxes or carbon permit systems-are relatively blunt instruments for cutting carbon emissions from ethylene production. In contrast, policies directly affecting the relative efficiencies of new to old capital-such as R&D stimuli or accelerated depreciation schedules-may be more effective in leveraging the industry's potential for carbon emissions reductions.