Analysis of Carbon Capture Strategies for Refineries Considering Extraordinary Future Economic and Policy Uncertainties

Abstract

The shifting transportation landscape, driven primarily by the electrification of the vehicle fleet and tightening carbon regulations, is reshaping the market for liquid fuels and challenging many existing refineries. Strategic decisions about carbon mitigation investments, such as carbon capture and storage (CCS), are complicated by uncertainty in evolving fuel markets and regulatory frameworks. This study assesses the cost-effectiveness and the opportunity of deploying CCS within the refining sector in the United States amidst a transitioning transportation fuel market and increasingly stringent carbon pricing policies. By integrating a carbon capture module into the Petroleum Refinery Life Cycle Inventory Model (PRELIM), we assess greenhouse gas (GHG) emissions under various fuel demand scenarios and examine the role of CCS in mitigation. Our findings indicate that the annual GHG emissions from U.S. refineries may decline from 212 MtCO₂/y in 2019 to 111 MtCO₂/y in 2050 due to demand shifts, while CCS could further reduce emissions to 47.6 MtCO₂/y. Fluid Catalytic Crackers (FCCs) are the most significant emissions source, with a potential reduction of 18.5 MtCO₂/y at a CO₂ avoidance cost as low as $83.5/t. We also conduct a real options (RO) analysis to explore how refineries might respond to fuel market changes and carbon pricing. Results suggest hydroskimming refineries could be phased out by the early 2030s due to market and policy pressures, while medium and deep conversion refineries may accelerate CCS deployment by the 2040s. Hence, policy should enable CCS deployment as a transitional mitigation strategy while maintaining consistency with long-term decarbonization pathways.