Direct Energy Purchase Costs as % of Shipment Value under Three EIA Projection Scenarios of the American Power Act (2016)

The impact of energy-related costs varies under the three EIA scenarios. Direct energy purchases are limited to less than 1% of the value of shipments for all subsectors except nitrogenous fertilizers in the medium scenario. In the high scenario, energy-related purchases are less than 4% of shipments, except for nitrogenous fertilizers, where it is more than 12% of shipments.

WRI assumed that the fuel mix for each of these subsectors remains constant, and only quantified changes in costs due to policy, and relative to no policy. In addition, our assessment only includes costs from direct natural gas, fuel oil, LPG, LNG, coal, and electricity purchases and does not consider the potentially higher costs of raw materials, which are derived from natural gas or oil products, because of data limitations. As such, these results may not be representative of the costs for chemicals subsectors that are large purchasers of select raw materials. For example, producers in the plastic material and resin subsector rely on natural gas-based feedstocks. The results don’t capture the price increases of these feedstocks passed along to these subsectors. Thus, the energy and emissions intensity and ability to pass along costs of suppliers within the chemicals industry are also key factors in determining the credit effects of climate policy.