Carbon Leakages: Towards Tailored Policies to Reduce Emissions Embodied in the EU Petrochemical Sector

Michel Zimmermann & Vincent Moreau

27th August 2019, Session 3C: Energy Policy II

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Decoupling Greenhouse Gas Emissions fromEconomic Growth in the EU is vital

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The EU and its Member States have achieved (relative) decoupling of over the last decade

0

20

40

60

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160

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200

220

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Index (

2007 =

100)

GDP at market prices - EU GHG emissions - EU

GPD at market prices - Germany GHG emissions - Germany

GDP at market prices - Poland GHG emissions - Poland

Eurostat, 2019

The Petrochemical Industry achieved necessarydecoupling

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Source: Cefic, 2018

Development of EU chemicals production and greenhouse

gas emissions A successful decoupling

has been achieved by reducing GHG emissions, even though production has grown substantially

This however neglects the trade dynamics of the petrochemical industry

Production- vs. Consumption-based Accounting16th

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Production-based AccountingConsumption-based Accounting

Producer carbon responsibility Consumer carbon responsibility

Method adopted by UNFCCCAlternative method that puts the burden

of emitting GHG on consumers

Accounts for GHG emitted within a

country’s territory when goods, services

or energy are produced

Accounts for GHG emitted within a

country’s territory when goods, services

and energy are consumed

Does not consider where goods are

finally consumed (i.e. imports)

Does not consider where goods are

produced (i.e. exports)

Unable to account for potential carbon

leakage, both weak and strong

Focusing on Territorial Emissions favours highly Industrialised Countries

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• Big differences between the

developed and developing

economies with respect to

their emission trade balance

• The GHG emission trade

deficit illustrates the potential

distortion of the carbon

responsibility of developed

countries

Peters and Hertwich, 2007

Emissions embodied in industry and exports

compared to total production-based emissions

Embodied Emissions in the Petrochemical Industry16th

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Year 2014

Virtual carbon flows between petrochemical sectors among EU

member states (Gt of GHG) are becoming increasingly more

integrated

Year 2000

Research Objectives16th

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As a result of only focusing on territorial emissions, the analysis of whether decoupling is

achieved for European petrochemical industries may not be an accurate representation

We aim to analyse the state of decoupling in EU petrochemical industries,

based on a range of different measures of carbon responsibility

Neglecting embodied emissions further raises questions about the responsibility of different

countries with regards to their contribution to the European emission inventory

We illustrate how the allocation of GHG emissions impacts the “true” carbon

responsibility of different countries and their respective petrochemical sector

and enable a more equitable representation of the contribution to emission

reduction targets

National and industrial energy and climate policies are mainly as a result of territorial emission

inventories only and similarly focus on the reduction thereof

We therefore propose taking account of the varying emission burdens of

countries and the petrochemical industry in policy-making, by showing the

impact of the different carbon responsibility measures

Scenarios16th

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IFull producer carbon responsibility (i.e. territorial emissions

from production + exports)

IIFull consumer carbon responsibility (i.e. territorial

emissions from production + imports – exports)

IIIShared carbon responsibility

A mix between full producer and carbon responsibility, e.g. an

average

Other scenarios planned with alternative weights E.g. Attribution of relative responsibility based on the individual contributions of each

actor in the supply chain to value added

Use of EORA dataset, an open source global multi-regional input-output table, which links 26 activities (i, j = 1, 2, … 26) in 189 countries plus RoW (C = 1, 2, …, 190) and provides complete time series from 1990 to 2015

Assessment of the impact of different carbon responsibility measures, depending on emission factors 𝑒𝑖, final demand 𝑦𝑖𝑗 and technical coefficients matrix 𝐴𝑖𝑗

Multi-Regional Input-Output Analysis16th

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𝑝11 ⋯ 𝑝1𝐶⋮ ⋱ ⋮𝑝𝐶1 ⋯ 𝑝𝐶𝐶

=𝐸1 ⋯ 0⋮ ⋱ ⋮0 ⋯ 𝐸𝐶

𝐼 − 𝐴11 ⋯ −𝐴1𝐶⋮ ⋱ ⋮

−𝐴𝐶1 ⋯ 𝐼 − 𝐴𝐶𝐶

−1 𝑦11 ⋯ 𝑦1𝐶⋮ ⋱ ⋮𝑦𝐶1 ⋯ 𝑦𝐶𝐶

𝑃𝑟𝑜𝑑𝑢𝑐𝑒𝑟 𝑟𝑒𝑠𝑝𝑜𝑛𝑠𝑖𝑏𝑖𝑙𝑖𝑡𝑦𝑖 = 𝑗𝑝𝑖𝑗

𝐶𝑜𝑛𝑠𝑢𝑚𝑒𝑟 𝑟𝑒𝑠𝑝𝑜𝑛𝑠𝑖𝑏𝑖𝑙𝑖𝑡𝑦𝑖 = 𝑝𝑖𝑖 +𝑗(𝑝𝑖𝑗−𝑝𝑖𝑖) −

𝑖(𝑝𝑖𝑗−𝑝𝑗𝑗)

𝑆ℎ𝑎𝑟𝑒𝑑 𝑟𝑒𝑠𝑝𝑜𝑛𝑠𝑖𝑏𝑖𝑙𝑖𝑡𝑦𝑖 = 𝑗𝑝𝑖𝑗 , 𝑝𝑖𝑖 +

𝑗(𝑝𝑖𝑗−𝑝𝑖𝑖) −

𝑖(𝑝𝑖𝑗−𝑝𝑗𝑗)

Results: 100 % Producer Carbon Responsibility16th

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ind

ex

[20

00

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00

]

–Germany –Spain

–UK –France

–Poland –Italy

Results: 100 % Consumer Carbon Responsibility16th

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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–Germany –Spain

–UK –France

–Poland –Italy

Results: Shared Responsibility - 50% Producer Responsibility and 50 % Consumer Responsibility

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–Germany –Spain

–UK –France

–Poland –Italy

« True » picture of decoupling in the EU petrochemical industry: Producer Responsibility vs. Consumer Responsibility

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0,0

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Kg

CO

2eq

/ U

SD [

20

10

USD

$]

POL PBA FRA PBA DEU PBA GBR PBA ESP PBA ITA PBA

POL CBA FRA CBA DEU CBA GBR CBA ESP CBA ITA CBA

Comparison –Consumer Carbon Responsibility: Worldwide vs. Intra-EU

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DEU ESP FRA GBR ITA POL

∆ k

TC

O2

eq

2000 2005 2010 2014

Main Lessons for Policy-Making16th

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ILooking at territorial emissions favors large exporting

petrochemical industries in certain countries over its import-

reliant counterparts

IILittle improvement in reducing emissions has been achieved

over the last decade, irrespective of the carbon accounting

method

IIIThe use of a mix of carbon responsibility measures allows

policy-makers to evaluate the emission burden on national

petrochemical industries more comprehensively

IVAs the emission trade with the rest of the world is becoming

more and more important, policy-makers will have to consider

potential carbon leakage with future energy policies

Conclusions16th

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IGreat differences in producer and consumer carbon

responsibility among EU petrochemical industries

IIDynamic shifts in carbon trade balances between the EU and

the rest of the world among EU countries

IIIScope for using a range of carbon responsibility methods to

devise more informed policies

Future work Testing of more elaborate responsibility attributions (e.g. based on value added)

Inclusion of structural effects by means of computable general equilibrium modelling

Eurostat, 2019. Database

Cefic, 2018. Facts and Figures of the European Chemical Industry

Peters and Hertwich, 2007. CO2 Embodied in International Trade with Implications for Global Climate Policy

References16th

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Embodied Emissions in the Petrochemical Industry: Comparison with Textile Industry

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This is much less accentuated in a less interconnected industries

Year 2000 Year 2014