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Modelling and allocation of CO2 emissions in a multiproduct industry: The case of oil refining

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  • Babusiaux, Denis
  • Pierru, Axel

Abstract

As oil refining is a multiproduct industrial activity, there are innumerable ways to allocate a refinery's CO2 emissions among the various refined products. The linear-programming models used to manage refineries may serve to compute the marginal contribution of each finished product to the CO2 emissions of the refinery. We show that, under some conditions, this marginal contribution is a relevant means of allocating all the refinery's CO2 emissions. The application of this allocation rule leads to interesting results which can be used in a well-to-wheel life cycle assessment. In fact, this allocation rule holds rigorously if the demand equations are the only binding constraints with a non-zero right-hand side coefficient. This is certainly not the case for short-run models with fixed capacity of processing units. To extend the application field of our approach, we therefore suggest three distinct solutions, inspired by economic theory: applying the Aumann-Shapley cost-sharing method, or adapting the Ramsey pricing-formula, or using proportionally-adjusted marginal contributions. A numerical application to a simplified refining model is presented.

Suggested Citation

  • Babusiaux, Denis & Pierru, Axel, 2009. "Modelling and allocation of CO2 emissions in a multiproduct industry: The case of oil refining," Applied Energy, Elsevier, vol. 84(7-8), pages 828-841, July.
    • Handle: RePEc:eee:appene:v:84:y:2009:i:7-8:p:828-841
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    References listed on IDEAS

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    1. Haimanko, Ori, 2001. "Cost sharing: the nondifferentiable case," Journal of Mathematical Economics, Elsevier, vol. 35(3), pages 445-462, June.
    2. YunTong Wang, 2002. "original papers : Proportionally adjusted marginal pricing method to share joint costs," Review of Economic Design, Springer;Society for Economic Design, vol. 7(2), pages 205-211.
    3. Boiteux, M., 1971. "On the management of public monopolies subject to budgetary constraints," Journal of Economic Theory, Elsevier, vol. 3(3), pages 219-240, September.
    4. Baumol, William J & Bailey, Elizabeth E & Willig, Robert D, 1977. "Weak Invisible Hand Theorems on the Sustainability of Multiproduct Natural Monopoly," American Economic Review, American Economic Association, vol. 67(3), pages 350-365, June.
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    Cited by:

    1. Jens Leth Hougaard & Jørgen Tind, 2013. "Cost Allocation with Limited Information," MSAP Working Paper Series 01_2013, University of Copenhagen, Department of Food and Resource Economics.
    2. Atalla, Tarek & Bigerna, Simona & Bollino, Carlo Andrea & Polinori, Paolo, 2018. "An alternative assessment of global climate policies," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1272-1289.
    3. Eric Johnson & Carl Vadenbo, 2020. "Modelling Variation in Petroleum Products’ Refining Footprints," Sustainability, MDPI, vol. 12(22), pages 1-15, November.

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