sectoral economic costs and benefits of ghg mitigation - IPCC

Energy Intensive Industries
Impacts on the U.S. Chemical Industry Related to Greenhouse
Gas Mitigation
Paul Cicio
The United States chemical industry produces over 70,000 products in 12,000 plants. These
products of chemistry have improved the standard of living for all Americans and people
throughout the world. Nearly every industry and individual depends on the products of chemistry
including technology-enhanced agricultural products, food grown from fertilizers, synthetic
fibers, life-saving medicines, plastics, paints, soaps and detergents, personal care products, inks,
adhesives, and water purifying products. Without the products of chemistry, many of the United
States’ premier manufacturing industries (agriculture, aerospace, automobiles, semiconductors,
and paper) would cease to exist. Health care and construction are also vitally dependent on the
products made by the chemical industry. In 1998, chemical industry shipments of $392 billion
and contributed nearly 2% to the US Gross Domestic Product (GDP). The U.S. chemical industry
is the world’s largest single national chemical industry, accounting for over a quarter of the $1.5
trillion in world sales of chemicals.
Historically a leading exporter, the chemical industry exports $1 out of every $10 in U.S. exports.
In 1998, the industry exported $68 billion making it the largest exporting sector in the United
States, selling more abroad than either the agriculture or aircraft/aerospace sectors.
The chemical industry is one of the most capital intensive industries given the high degree of
automation and large capacities often needed to obtain economies of scale in producing
chemicals. The level of capital stocks per employee in the chemical industry is over twice that for
U.S. manufacturing as a whole. In 1998, the industry added $28.4 billion in capital investment to
net capital stocks to $214 billion (valued on a current dollar basis). The average service life of
chemical industry capital equipment is 16 years, except for steam engines and turbines which
have a 32 year life. In addition to its large investment in capital, the U.S. chemical industry
provides over one million high paying jobs. Compared to the manufacturing average hourly wage
of $13.49, chemical industry production workers earn $17.12, a premium of nearly 27%,
reflecting the high skills and high labor productivity required. Over 9% of chemical industry
employees are engineers and scientists.
The U.S. chemical industry is based on continuous improvement and innovation in products and
processes. As one of the most innovative industries, the chemical industry routinely receives 15%
of manufacturing patents awarded in the United States. CMA’s annual economic survey revealed
that sales of products/services less than five years old accounted for 20% of total sales.
Innovation in processes is also apparent as emissions of criteria pollutants per unit of output and
energy use per unit of output have declined dramatically over the past 20 years (See figures 1 and
2).
The chemical processes used to create the products of chemistry include complex combinations
of reaction, distillation, absorption, filtration, extraction, drying and screening processes. Many
of these processes have extremely high energy requirements, both in terms of heat/power and
energy feedstocks. Petroleum is the largest source of feedstocks followed by natural gas, coal and
biomass (see figure 3). The magnitude of these energy requirements makes the chemical industry
one of the most energy-intensive industries, consuming 6.2 quads of energy, nearly one quarter
of all energy used in manufacturing and 6.8% of all total energy consumption in the U.S.
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