Oil refining in a CO2 constrained world: Effects of carbon pricing on refineries globally

Six aggregated refinery linear programming (LP) models were developed to represent actual refineries in North America, Latin America, Europe (including the CIS), Middle East, Asia (excluding China) and China. The models were used to conduct regional comparative assessments and to evaluate the effects of carbon pricing on refinery operations globally. We found that the average refinery energy efficiencies for the regions were estimated to range from 92.2% to 95.2%. The well-to-refinery gate carbon intensities for gasoline, diesel and jet fuels were estimated to be 17.1 (16.4-19.4), 13.3 (12.5-14.2) and 10.1 (9.6-10.8) gCO2eq/MJ, respectively. If refineries are forced to at least meet the 2014 regional volume demands for oil products, pricing CO2 would not have an impact on either refinery productions, efficiency or emissions. If refineries are allowed to re-optimize production slates to reduce CO2 emissions, refineries would opt to increase gasoline yield at the expense of diesel. This is counter intuitive since gasoline has a higher carbon intensity than diesel. The refinery bias against dieselization creates a supply preference toward a less efficient transportation end use. Here, we argue that if carbon pricing is not administered properly, this can lead to emissions leakage from refineries to the road transport sector.