AM-17-61 Cost of Carbon – It’s Not Just Social Anymore…

Description:

The social cost of carbon (SCC) has been used by the U.S. government and the EPA to help justify rulemaking. The SCC essentially quantifies the damages due to carbon emissions that a proposed rulemaking would mitigate over the next 300 years. Although this is nice for EPA to use in justifying rulemaking, it doesn’t represent a real cost of carbon emissions from an operating refinery or petrochemical plant. We all know that the “Paris Climate Deal” is likely going to force the United States’ hands to further regulate carbon emissions, we just don’t know exactly what that might look like. There are a number of regulatory models for reducing carbon emissions in practice already world-wide including cap-and-trade, carbon tax, energy efficiency requirements, etc. Therefore, many oil companies have defined what has been coined a “shadow cost of carbon”. This is the cost that one would expect to spend on each ton of carbon emitted given the uncertainty associated with future regulatory schema. Everyone from refining majors to entertainment giants have published these shadow costs and purportedly use them in project justification. The paper will explore the various costs of carbon and give perspective on these costs to consumers and an operating company.