Refinery emissions: implications of carbon tax and mitigation options

The energy transition will present three main challenges to refiners. First, reduced market size for refined products will lead to poor refinery margins and refinery closures. Second, demand for transport fuels, which account for more than 50% of refinery production, will be hit hardest. Refiners will have to reconfigure and shift to petrochemicals, for which demand growth is projected. Third, the possibility of a high carbon tax on refinery carbon emissions as part of broader decarbonisation efforts will impact profits.

Reducing emissions in hard to decarbonise industries will be necessary to meet net zero carbon emission targets in many countries. The refining industry accounts for only 3% of global energy sector emissions. But carbon tax on refinery carbon emissions can have a material impact on profitability, as it will be difficult to pass on carbon costs to consumers through higher product prices.

Refiners will have to start thinking about measuring, monitoring and reducing carbon emissions and find cost-effective ways to reduce their carbon footprint. Environmental sustainability has to be a priority for refiners. They will need to find their own unique decarbonisation solutions and yet still remain economically viable.

As every refinery is unique, there is no one-size-fits-all solution. Refiners must start with identifying the sources of their emissions and work out the most cost-effective ways to reduce their carbon footprint. There will not be a blanket solution for the refining industry but a combination of solutions to solve this complex refining decarbonisation problem.

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