Allocating the CO2 Emissions of an Oil Refinery with Aumann-Shapley Prices

Posted: 4 Dec 2009  

Axel Pierru

King Abdullah Petroleum Studies and Research Center (KAPSARC)

Date Written: December 3, 2007

Abstract

Linear programming is widely used by multiproduct oil-refining firms which minimize a refinery’s variable cost under a set of constraints. In addition to operating costs, this variable cost can include the cost associated with the refinery’s CO2 emissions. We suggest a quite general approach combining use of Aumann-Shapley cost-sharing method and breakdown of the objective function of the linear program. This approach determines an appropriate rule for the allocation of the refinery’s CO2 emissions (or, in general, variable costs) among the various finished products, which can be used for purposes of Life Cycle Assessment. A numerical application to a simplified refining model is presented.

Keywords: Aumann-Shapley, oil refining, linear programming, LCA, CO2

JEL Classification: Q4, Q53, C61, C71

Suggested Citation

Pierru, Axel, Allocating the CO2 Emissions of an Oil Refinery with Aumann-Shapley Prices (December 3, 2007). Energy Economics, Vol. 29, No. 3, 2007. Available at SSRN: https://ssrn.com/abstract=1517644

Axel Pierru (Contact Author)

King Abdullah Petroleum Studies and Research Center (KAPSARC) ( email )

Riyadh, Central Province
Saudi Arabia

HOME PAGE: http://www.kapsarc.org/

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