Case studies of the potential effects of carbon taxation on the stone, clay, and glass industry

Abstract

This case study focuses on the potential for a carbon tax ($25 and $100 per metric ton of carbon) to reduce energy use and associated carbon dioxide (CO2) emissions in three subsectors of the stone, clay, and glass industry: hydraulic cement, glass and glass products, and other products. A conservation supply curve analysis found _at (1)opportunities for reducing fossil fuel use in the subsectors are limited (15% reduction under $100 tax) and (2)the relationship between the tax and reduced CO2 emissions is nonlinear and diminishing. Because cement manufacturing produces a significant amount of CO2, this subsector was analyzed. A plantlevel analysis found more opportunities to mitigate CO2 emissions; under a $100 tax, fossil fuel use would decrease 52%. (A conservative estimate lies between 15% and 52%). It also confirmed the nonlinear relationship, suggesting significant benefits could result from small taxes (32% reduction under $25 tax). A fuel share analysis found the cement industry could reduce carbon loading 11%under a $100 tax if gas were substituted for coal. Under a $100 tax, cement demand would decrease 17% and its price would increase 32%, a substantial increase for a material commodity. Overall, CO2 emissions from cement manufacturing would decrease 24-33% under a $100 tax and 10-18% under a $25 tax. Much of the decrease would result from the reduced demand for cement. SUMMARY Thiscasestudyfocuses on the potential fora carbontax toreduceenergyuse and associated carbondioxide (CO2)emissions inthreedisaggregated subsectors ofthestone, clay, and glass industry (standard industrial classification [SIC]code32):hydraulic cement,glass and glassproducts, and otherSIC 32 products. Two levels ofcarbontaxareanalyzed:$25 and $100 per metrictonofcarbonemitted. In the first pm_ of the case study, a conservation supply curve (CSC) mmlysis was performed. This analysis found that the opportunities for reducing energy use in all three subsectors are similar and limited. A 15% reduction in fossil fuel use would occur under a $100 tax. The analysis also found that the relationship between the carbon tax and the • Cement demand would decrease 17%, and its price would increase 32% under a $100 tax. This increase in price is substantial for a material commodity. Overall, CO2 emissions from cement manufacturing would decrease 24-33% under a $100 tax and 10-18% under a $25 tax. Ranges are given because the aggregate CSC and plant-level estimates differed. In both cases, much of the decrease in emissions would be a result of the reduced demand for cement because of an increase in price. .I This study ass,_._ssesthe impact of carbon taxes on reducing energy demand and associated CO 2 emissions in the stone, clay, and glass industry (standard industrial classification [SIC] 32). Carbon taxes are the most widely studied policy instrument for reducing CO2 emissions (