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ENERGY INTENSIVE MANUFACTURING INDUSTRIES AND GHG EMISSIONS
Jared Creason1, Jameel Alsalam1, Kong Chiu1
1Office of Air and Radiation, Climate Change Division, U.S. Environmental Protection Agency, Washington D.C., United States.
Climate Change Economics
|December 22, 2021
Summary
Climate policy measures for energy-intensive, trade-exposed manufacturing face challenges. Analysis shows emissions fell significantly in eligible sectors, but policy definitions need refinement for future effectiveness.
Area of Science:
- Environmental Economics
- Industrial Ecology
- Climate Policy Analysis
Background:
- U.S. energy-intensive, trade-exposed (EITE) manufacturing faces competitive challenges from climate policies.
- The American Clean Energy and Security Act of 2009 (ACES) proposed measures to mitigate these impacts and prevent emissions leakage.
- Previous policy designs require retrospective analysis with updated data to assess their effectiveness and inform future strategies.
Purpose of the Study:
- To retrospectively analyze the 2009 ACES eligibility criteria for EITE manufacturing using updated data from 2004-2017.
- To evaluate the trends in energy intensity, emissions intensity, output, and emissions within EITE sectors.
- To provide recommendations for future climate policy design for EITE industries.
Main Methods:
- Retrospective analysis of 2009 ACES eligibility criteria using 2004-2017 data.
- Decomposition of emissions changes using scale and intensity measures (Grossman and Krueger, Kaya and Yokoburi).
- Comparative analysis using EPA's Greenhouse Gas Reporting Program data for facility-level emissions.
Main Results:
- Energy intensity, emissions intensity, output, and emissions fluctuated with economic conditions, highlighting challenges in defining stable policy measures.
- Had ACES been enacted without revisions, the number of qualifying EITE sectors would have decreased from 39 to 26.
- Emissions from eligible sectors fell 26%, significantly more than the 5% decrease in overall manufacturing emissions.
Conclusions:
- Defining robust and informative measures and thresholds for EITE policy remains a significant challenge.
- Future policies should consider measures that simplify price adjustments, focus on a smaller group of industries, identify emissions leakage-prone sectors, and account for spatial heterogeneity.
- Refined policy design is crucial to effectively support domestic industry while addressing climate change goals.
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