The European Refinery: Carbon pricing effects on future feedstock choice

Refineries convert fossil oil into fuels and plastic feedstocks via integrated processes, making their transition crucial for climate neutrality. Carbon pricing mechanisms, like the EU Emissions Trading System, promote low-carbon fuels but do not consider carbon temporarily bound in products like plastics. A potential solution is crediting carbon temporarily bound in products, incentivising renewable feedstocks. However, it is unclear how these pricing methods affect the integrated production in refineries. In this work we develop a linear optimisation model of the coupled production of fuels, olefins, aromatics, and bitumen. Using the EU in 2050 as a case study we analyse how the pricing of carbon temporarily bound in plastics affects the cost optimal target system. We find that considering carbon temporarily bound reduces emissions, fossil oil use, and cost significantly compared to the current regulation. Our findings guide the advancement of carbon pricing policies to support the transition to sustainable refineries.