Energy Trends 

in Selected 

Manufacturing Sectors: 

Opportunities and Challenges

 for Environmentally Preferable 

Energy Outcomes 

March 


2007

U.S. Environmental Protection Agency 

Energy Trends 

in Selected Manufacturing Sectors: 

Opportunities and Challenges for 

Environmentally Preferable 

Energy Outcomes 

Final Report 

March 2007 

Prepared for: 

U.S. Environmental Protection Agency 

Office of Policy, Economics, and Innovation 

Sector Strategies Division 

Prepared by: 

ICF International 

9300 Lee Highway 

Fairfax, VA 22031 

(703) 934-3000 

Table of Contents 

List of Acronyms.........................................................................................................................................v

Acknowledgements ..................................................................................................................................vii

Executive Summary..............................................................................................................................ES-1

1. Introduction........................................................................................................................................1-1

1.1. Objectives ................................................................................................................................1-1

1.2. Methodology ............................................................................................................................1-1

1.3. Organization of the Report.......................................................................................................1-5

2. Current Energy Consumption ..........................................................................................................2-1

2.1. U.S. Energy Overview..............................................................................................................2-1

2.2. Sector Energy Overview ..........................................................................................................2-8

2.3. Environmental Context...........................................................................................................2-24

2.4. Economic Context..................................................................................................................2-32

3. Sector Energy Scenarios ..................................................................................................................3-1

3.1. Alumina and Aluminum............................................................................................................3-4

3.2. Cement ..................................................................................................................................3-12

3.3. Chemical Manufacturing ........................................................................................................3-21

3.4. Food Manufacturing...............................................................................................................3-31

3.5. Forest Products......................................................................................................................3-39

3.6. Iron and Steel.........................................................................................................................3-53

3.7. Metal Casting .........................................................................................................................3-65

3.8. Metal Finishing.......................................................................................................................3-71

3.9. Motor Vehicle Manufacturing .................................................................................................3-77

3.10. Motor Vehicle Parts Manufacturing........................................................................................3-83

3.11. Petroleum Refining ................................................................................................................3-88

3.12. Shipbuilding and Ship Repair ................................................................................................3-96

4. Barriers to Environmentally Preferable Energy Outcomes...........................................................4-1

4.1. Overview of Barriers ................................................................................................................4-1

4.2. Nonregulatory Barriers.............................................................................................................4-1

4.3. Regulatory Barriers..................................................................................................................4-4

4.4. Conclusion ...............................................................................................................................4-9

5. Policy Options....................................................................................................................................5-1

5.1. Internal Actions and Coordination............................................................................................5-1

5.2. External Actions and Coordination ..........................................................................................5-6

5.3. Conclusion ...............................................................................................................................5-7

Appendix A: Energy Projections ........................................................................................................... A-1

A.1. Clean Energy Future Scenarios.............................................................................................. A-2

A.2. Annual Energy Outlook Scenarios.......................................................................................... A-4

References 

U.S. Environmental Protection Agency i March 2007 
Table of Contents 

List of Figures 

Figure 1: U.S. energy consumption trends 1970-2005: comparison of industrial, transportation, 

residential, and commercial end uses ....................................................................................2-1

Figure 2: Natural gas consumption 1989-2005: comparison of industrial, residential, and 

commercial end uses..............................................................................................................2-4

Figure 3: Petroleum consumption 1989-2005: comparison of industrial, transportation, 

residential, and commercial end uses ....................................................................................2-5

Figure 4: Coal consumption 1989-2005: comparison of industrial and non-industrial end uses ..........2-5

Figure 5: Purchased electricity consumption 1989-2005: comparison of industrial, residential, 

and commercial end uses.......................................................................................................2-6

Figure 6: Aluminum sector: energy-related CAP emissions ..................................................................3-7

Figure 7: Aluminum sector: CAP emissions by source category and fuel usage ..................................3-8

Figure 8: Cement sector: energy-related CAP emissions....................................................................3-15

Figure 9: Cement sector: CAP emissions by source category and fuel usage....................................3-16

Figure 10: Chemical sector: energy-related CAP emissions .................................................................3-25

Figure 11: Chemical sector: CAP emissions by source category and fuel usage .................................3-26

Figure 12: Food manufacturing sector: energy-related CAP emissions ................................................3-34

Figure 13: Food manufacturing sector: CAP emissions by source category and fuel usage ................3-35

Figure 14: Forest products sector: energy-related CAP emissions .......................................................3-44

Figure 15: Forest products sector: CAP emissions by source category and fuel usage .......................3-46

Figure 16: Iron and steel sector: energy-related CAP emissions ..........................................................3-58

Figure 17: Iron and steel sector: CAP emissions by source category and fuel usage ..........................3-59

Figure 18: Metal casting sector: energy-related CAP emissions...........................................................3-67

Figure 19: Metal casting sector: CAP emissions by source category and fuel usage...........................3-68

Figure 20: Metal finishing sector: energy-related CAP emissions .........................................................3-73

Figure 21: Metal finishing sector: CAP emissions by source category and fuel usage .........................3-74

Figure 22: Motor vehicle manufacturing sector: energy-related CAP emissions...................................3-79

Figure 23: Motor vehicle manufacturing sector: CAP emissions by source category and 

fuel usage .............................................................................................................................3-80

Figure 24: Motor vehicle parts manufacturing sector: energy-related CAP emissions..........................3-85

Figure 25: Motor vehicle parts manufacturing sector: CAP emissions by source category and 

fuel usage .............................................................................................................................3-86

Figure 26: Petroleum refining sector: energy-related CAP emissions...................................................3-91

Figure 27: Petroleum refining sector: CAP emissions by source category and fuel usage...................3-92

Figure 28: Shipbuilding and ship repair sector: energy-related CAP emissions....................................3-97

Figure 29: Shipbuilding and ship repair sector: CAP emissions by source category and fuel usage....3-98

List of Tables 

Table 1: Sector opportunity assessment summary table........................................................................ES-4

Table 2: Manufacturing sectors addressed in this analysis .......................................................................1-1

Table 3: Fraction of total energy demand met by fuel type in 2004: comparison of residential, commercial, 

industrial, and transportation end uses.........................................................................................2-3

Table 4: Sector energy consumption and energy intensity in 2002...........................................................2-8

Table 5: Sector energy consumption by fuel type in 2002 .....................................................................2-10

Table 6: Sector fuel inputs as fraction of total energy requirements in 2002...........................................2-11

Table 7: Sector fuel-switching potential in 2002: natural gas to alternate fuels ......................................2-13

Table 8: Sector fuel-switching potential in 2002: coal to alternate fuels..................................................2-14

Table 9: Sector energy intensity in 2002 .................................................................................................2-16

Table 10: Sector energy use and loss footprint in 1998 ..........................................................................2-20

Table 11: Commodity shipments by sector in 2002.................................................................................2-23

Table 12: Health and environmental impacts of energy-related air pollutants.........................................2-24

Table 13: Energy-related CAP emissions by sector in 2002 ...................................................................2-27

U.S. Environmental Protection Agency ii March 2007 
Table of Contents 

Table 14: Energy-related CAP emissions by source category in 2002 ...................................................2-29

Table 15: Comparison of 2002 data on energy-related CAP emissions, total energy consumption, and 

energy intensity by sector .........................................................................................................2-30

Table 16: Annual growth in value added and value of shipments 1997-2004.........................................2-32

Table 17: Overview of key economic characteristics by sector ...............................................................2-34

Table 18: Current economic and energy data for the aluminum industry..................................................3-5

Table 19: CEF reference case projections for the aluminum industry.......................................................3-7

Table 20: Opportunity assessment for the aluminum industry...................................................................3-9

Table 21: CEF advanced case projections for the aluminum industry ....................................................3-10

Table 22: Current economic and energy data for the cement industry....................................................3-13

Table 23: CEF reference case projections for the cement industry.........................................................3-15

Table 24: Opportunity assessment for the cement industry ....................................................................3-17

Table 25: CEF advanced case projections for the cement industry ........................................................3-19

Table 26: Current economic and energy data for the chemical manufacturing industry .........................3-22

Table 27: CEF reference case projections for the bulk chemicals industry.............................................3-24

Table 28: Opportunity assessment for the chemical manufacturing industry ..........................................3-27

Table 29: CEF advanced case projections for the chemicals industry ....................................................3-29

Table 30: Current economic and energy data for the food manufacturing industry.................................3-32

Table 31: CEF reference case projections for the food manufacturing industry......................................3-33

Table 32: Opportunity assessment for the food manufacturing industry .................................................3-36

Table 33: CEF advanced case projections for the food manufacturing industry .....................................3-37

Table 35: Current economic and energy data for the pulp and paper industry .......................................3-41

Table 36: Current economic and energy data for the wood products industry........................................3-42

Table 37: CEF reference case projections for the pulp and paper industry ............................................3-43

Table 38: Opportunity assessment for the forest products industry ........................................................3-47

Table 39: CEF advanced case projections for the pulp and paper industry............................................3-50

Table 40: Current economic and energy data for the iron and steel industry..........................................3-55

Table 41: CEF reference case projections for the iron and steel industry...............................................3-58

Table 42: Opportunity assessment for integrated steelmaking................................................................3-60

Table 43: Opportunity assessment for EAF steelmaking.........................................................................3-62

Table 44: CEF advanced case projections for the iron and steel industry ..............................................3-63

Table 45: Current economic and energy data for the metal casting industry ..........................................3-66

Table 46: Opportunity assessment for the metal casting industry...........................................................3-68

Table 47: Current economic and energy data for the metal finishing industry ........................................3-72

Table 48: Opportunity assessment for the metal finishing industry .........................................................3-75

Table 49: Current economic and energy data for the motor vehicle manufacturing industry ..................3-78

Table 50: Opportunity assessment for the motor vehicle manufacturing industry...................................3-81

Table 51: Current economic and energy data for the motor vehicle parts manufacturing industry .........3-83

Table 52: Opportunity assessment for the motor vehicle parts manufacturing industry..........................3-86

Table 53: Current economic and energy data for the petroleum refining industry...................................3-88

Table 54: CEF reference case projections for the petroleum refining industry........................................3-90

Table 55: Opportunity assessment for the petroleum refining industry ...................................................3-92

Table 56: CEF advanced case projections for the petroleum refining industry .......................................3-94

Table 57: Current economic and energy data for the shipbuilding and ship repair industry ...................3-97

Table 58: Opportunity assessment for the shipbuilding and ship repair industry ....................................3-99

Table 59: Comparison of CEF industrial energy consumption projections through 2020: reference case 

and advanced case...................................................................................................................... A-2

Table 60: Qualitative representation of advanced energy policy impacts on CEF-NEMS model............. A-3

Table 61: Comparison of AEO 2006 industrial energy consumption projections through 2020: reference 

case and high technology case.................................................................................................... A-5

U.S. Environmental Protection Agency iii March 2007 
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U.S. Environmental Protection Agency iv March 2007 
List of Acronyms 

AA Aluminum Association 

ACC American Chemistry Council 

ACEEE American Council for an Energy-Efficient Economy 

AE Anode effects 

AEO Annual Energy Outlook 

AGF American Gas Foundation 

AF&PA American Forest & Paper Association 

AI Alternative ironmaking 

AISI American Iron and Steel Institute 

APMA Automotive Parts Manufacturers’ Association of Canada 

ASM Annual Survey of Manufacturers 

BART Best Available Retrofit Technology 

BOF Basic oxygen furnace 

BOH Basic open hearth 

BPA Bonneville Power Administration 

Btu British thermal units 

CAA Clean Air Act 

CAP Criteria air pollutant 

CEF Scenarios for a Clean Energy Future 

CEPA Clean Energy Program Administrators 

CERCLA Comprehensive Environmental Response, Compensation, and Liability Act 

CHP Combined heat and power 

CKD Cement kiln dust 

CO Carbon monoxide 

CO2 Carbon dioxide 

CTL Coal-to-liquids 

DG Distributed generation 

DR Demand response 

DOE U.S. Department of Energy 

DOL U.S. Department of Labor 

DOT U.S. Department of Transportation 

DSW Definition of solid waste 

EAF Electric arc furnace 

EERE Energy Efficiency and Renewable Energy (DOE) 

EIA Energy Information Administration (DOE) 

EO Executive Order 

EPA U.S. Environmental Protection Agency 

EPI Environmental Performance Indicator 

FERC Federal Energy Regulatory Commission 

FIRE Food Industry Resource Efficiency 

GDP Gross domestic product 

GHG Greenhouse gas 

GTL Gas-to-liquids 

HAP Hazardous air pollutant 

HVAC Heating, ventilating, and air conditioning 

IGCC Integrated gasification combined cycle 

IOF Industries of the Future (DOE) 

IRS Internal Revenue Service (U.S. Department of the Treasury) 

ISO International Organization for Standardization 

ITP Industrial Technologies Program (DOE) 

KBtu Thousand Btu 

lb Pound 

LBNL Lawrence Berkeley National Laboratory 

LPG Liquified petroleum gas 

MACT Maximum Achievable Control Technology 

MBtu Million Btu 

MECS Manufacturing Energy Consumption Survey 

NAAQS National Ambient Air Quality Standards 

NAICS North American Industry Classification System 

U.S. Environmental Protection Agency v March 2007 
List of Acronyms 

NEI National Emissions Inventory 

NEMS National Energy Modeling System 

NESHAP National Emission Standards for Hazardous Air Pollutants 

NGL Natural gas liquids 

NH3 Ammonia 

NOx Nitrogen oxides 

NPDES National Pollutant Discharge Elimination System 

NSPS New Source Performance Standards 

NSR New Source Review 

O&M Operations and maintenance 

OAQPS Office of Air Quality Planning and Standards (EPA) 

OAR Office of Air and Radiation (EPA) 

OEM Original equipment manufacturer 

OPEI Office of Policy, Economics, and Innovation (EPA) 

OSHA Occupational Safety and Health Administration (DOL) 

OSW Office of Solid Waste (EPA) 

PCA Portland Cement Association 

PEL Permissible exposure limit 

PFC Perfluorocarbon 

PM Particulate matter 

ppm Parts per million (pollutant) 

PSD Prevention of Significant Deterioration 

PURPA Public Utility Regulatory Policies Act 

PV Photovoltaic 

R&D Research and development 

RCRA Resource Conservation and Recovery Act 

RD&D Research, development, and demonstration 

ROI Return on investment 

RSE Relative Standard Error 

RTO Regenerative thermal oxidizer 

SCC Source Classification Code (NEI) 

SGP Strategic Goals Program 

SIC Standard Industrial Classification 

SO2 Sulfur dioxide 

SOBOT Saving One Barrel of Oil per Ton (AISI initiative) 

SOCMA Synthetic Organic Chemical Manufacturers Association 

SOx Sulfur oxides 

SPCC Spill Prevention Countermeasures and Control 

SSD Sector Strategies Division (EPA) 

SSP Sector Strategies Program (EPA) 

STAC State Technologies Advancement Collaborative 

TBtu Trillion Btu 

TPY Tons per year (emissions) 

USDA U.S. Department of Agriculture 

USGS U.S. Geological Survey (U.S. Department of the Interior) 

VAIP Voluntary Aluminum Industrial Partnership 

VOC Volatile organic compound 

U.S. Environmental Protection Agency vi March 2007 
Acknowledgements 

We would like to thank the following organizations, their staff, and members for review and 

comment on draft versions of this report: 

Aluminum Association 

Alliance of Automobile Manufacturers 

American Forest & Paper Association 

American Iron & Steel Institute 

American Shipbuilding Association

Energy Industries of Ohio 

Portland Cement Association 

Shipbuilders Council of America 

Synthetic Organic Chemical Manufacturers Association 

University of Michigan, Department of Mechanical Engineering 

U.S. Department of Energy 

U.S. Environmental Protection Agency vii March 2007 
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Executive Summary 

Objective 

The objective of this report is to assist the Sector 

Strategies Division (SSD) of the U.S. Environmental 12 Industrial Manufacturing Sectors 

Examined in This Report Protection Agency (EPA) in developing strategies to 

promote environmentally preferable outcomes with • Alumina and aluminum 

respect to energy consumption in 12 industrial • Cement 

manufacturing sectors. For the purposes of this • Chemical manufacturing

analysis, environmentally preferable energy • Food manufacturing 

outcomes are achieved by reductions in energy- • Forest products 

related air emissions through increased energy • Iron and steel 

efficiency (which reduces fuel consumption and • Metal casting 

associated emissions) and/or transitioning to less • Metal finishing 

emissions-intensive energy sources. This analysis • Motor vehicle manufacturing 

focuses primarily on emissions of criteria air • Motor vehicle parts manufacturing 

pollutants (CAPs), but it also includes some • Petroleum refining 

projections of carbon dioxide (CO2) emissions. Other • Shipbuilding and ship repair 

air emissions, such as air toxics, and water and land 

impacts are not included. 

Across the 12 sectors, this analysis characterizes energy consumption within the context of 

recent and expected future energy trends and provides a broad overview of the environmental 

and economic context surrounding sector energy usage. Building on this overview, the analysis 

provides sector-specific “base case” and “best case” energy scenarios, identifying opportunities 

for promoting environmentally preferable energy outcomes as well as potential regulatory and 

nonregulatory barriers to improved environmental outcomes. To address potential regulatory 

barriers to investment in energy efficiency and clean energy technologies in these sectors, this 

analysis proposes a number of policy options that EPA could pursue—both internally at EPA 

and externally in coordination with other agencies and stakeholders—to remove or reduce the 

barriers. 

Approach 

Drawing upon the most recent publicly available data sources that address energy consumption 

in these 12 industrial manufacturing sectors, as well as perspectives and insights provided 

through interviews with internal and external stakeholders, this report provides a broad overview 

of sector energy consumption, economic trends, and the environmental impacts of sector 

energy consumption in terms of energy-related air emissions. In a summary of each sector, we 

describe current energy trends and associated environmental impacts in terms of air emissions 

of CAPs and carbon dioxide. We project how future energy trends and associated emissions 

could be impacted by implementation of key opportunities for energy efficiency and clean 

energy improvement. We then discuss the ways in which regulations and other nonregulatory 

factors may create barriers to energy efficiency and clean energy improvement, providing 

specific examples from the literature we reviewed and the stakeholder interviews we conducted. 

Finally, we set forth several policy approaches that EPA could explore to address regulatory 

barriers and promote environmentally preferable outcomes with respect to energy consumption 

in these manufacturing sectors. 

U.S. Environmental Protection Agency ES-1 March 2007 
Executive Summary 

Key Energy Trend Findings 

This analysis produced the following overarching insights: 

• Comprising the largest fraction of total U.S. energy demand, the industrial sector presents 

considerable opportunities for improving environmental performance through increased 

adoption of energy efficiency and clean energy technologies. 

• Industrial energy use has been growing more slowly than energy use in the residential, 

commercial, and transportation sectors. This is because industry as a whole has become 

a smaller proportion of the economy, has shifted to less energy-intensive types of 

manufacturing, and has already implemented a number of energy-saving technologies. 

• Under a business-as-usual energy scenario, aggregated energy consumption across 

many of the sectorsa

 addressed in this analysis is projected to increase by 20 percent 

from 2004 levels by 2020, and CO2 emissions are projected to increase by 14 percent.1 

Faster growth is projected for onsite consumption of fossil fuels and renewable energy (a 

projected increase of 60 percent over the period) than for purchased electricity (a 

projected increase of 12 percent over the period). 

• Rising energy costs and the pressures of global competition pose continuing challenges 

for industrial manufacturing sectors but also create an opportunity for energy efficiency to 

play an increasing role in helping businesses’ competitive positions. 

• The types of fuel used by industry have changed over time. During the last 50 years, 

industry has decreased direct coal use and increased natural gas use. Recent increases 

in both the price and price volatility of natural gas may interrupt these trends, although 

over the short term, most sectors are not able to switch fuels easily. Industrial use of 

renewable fuels is growing, and is already higher than the use of renewable fuels in the 

residential, commercial, and transportation sectors. 

• For each sector, this analysis compares energy-related CAP emissions with total CAP 

emissions, including those that result from manufacturing processes. The primary CAP 

emissions resulting from energy use are sulfur dioxide and nitrogen oxides. In general, the 

largest sources of energy-related CAP emissions are external combustion boilers and 

manufacturing process equipment. Upstream emissions from electrical generating units 

that supply industrial energy users with purchased electricity are not included in this 

analysis. Only onsite emissions resulting from energy use are included. 

• Investment in energy efficiency and clean energy is fundamentally a business decision, 

and the success of strategies to promote environmentally preferable energy outcomes will 

depend primarily on the business case for such investments. 

• Strategies for promoting energy efficiency and clean energy investment should be tailored 

to address sector-specific economic trends and characteristics such as 

declining/increasing productivity, sensitivity to energy cost fluctuations, average firm size, 

the homo- or heterogeneity of manufacturing processes within the sector, and the sector’s 

geographic distribution. 

a The projections referenced here are contained in supplemental tables to the U.S. Department of Energy’s Annual Energy 

Outlook 2006 and apply to aggregated energy consumption and carbon dioxide emissions across the following sectors: 

aluminum, cement, bulk chemicals, food manufacturing, iron and steel, metals-based durables (containing metal finishing), 

pulp and paper (part of forest products), and petroleum refining. 

U.S. Environmental Protection Agency ES-2 March 2007 
Executive Summary 

Key Opportunities for Environmentally Preferable Energy Outcomes 

Our analysis focuses on five key opportunities for improved environmental performance with 

respect to energy usage in industrial manufacturing sectors. Following is a brief definition of 

each opportunity:b 

• Cleaner fuels. Current fuel sources could be replaced with alternate fuels that have lower 

carbon and/or CAP emissions per unit of energy. This opportunity also includes selfgeneration of energy with renewable resources (biomass, solar, wind, and geothermal). 

• Combined heat and power (CHP). A form of distributed generation also referred to as 

“cogeneration,” a CHP system increases energy efficiency through onsite production of 

thermal energy (typically steam) and electricity from a single fuel source. 

• Equipment retrofit/replacement. Energy efficiency could be improved by retrofitting or 

replacing existing equipment used for onsite heat or power generation and distribution, 

manufacturing processes, or meeting facility requirements such as lighting and heating, 

ventilating, and air conditioning (HVAC). 

• Process improvement. Process improvement or optimization refers to either a wholesale 

process change that requires less energy for a similar level of manufacturing output or an 

adjustment to the manufacturing process that increases energy efficiency. The process 

improvement category also includes implementation of best practices in energy 

management. 

• Research and development (R&D). R&D could focus on developing new energy-efficient 

or clean energy technologies and processes that could be commercialized within the next 

one to two decades. 

Nonregulatory Barriers to Environmentally Preferable Energy Outcomes 

Several nonregulatory factors, including financial, technical, and institutional barriers, limit 

broader application of the energy efficiency and clean energy technologies addressed in this 

analysis, and hinder the achievement of environmentally preferable energy outcomes in 

manufacturing industries: 

• Financial barriers. Most of the energy consumed in the industrial sector is consumed in a 

few basic industries that produce commodity products—such as steel, basic chemicals, 

petroleum products, and paper—that are subject to stiff domestic and international 

competition. Some of these industries have already seen major declines in the United 

States and are concerned about their future viability. These industries have little appetite 

for new capital investment at this time, unless it is likely to bolster their future success. 

Given scarce capital resources in general, the greatest investment priorities are typically 

for equipment that maintains or increases production and product quality, or is necessary 

to meet regulatory requirements. Discretionary investments for energy efficiency or clean 

energy projects must often compete with these higher-priority investments. 

• Technical barriers. Some energy efficiency or clean energy opportunities are not well 

suited to a given industry’s manufacturing process. In other cases, process-related 

technical constraints affect the extent to which a given opportunity can be utilized. 

b Section 2.2.6 contains a more complete definition of each opportunity with important caveats. 

U.S. Environmental Protection Agency ES-3 March 2007 
Executive Summary 

• Institutional barriers. Energy is a small component of the cost of production in most 

industries. Only in the most energy-intensive industries—such as aluminum, cement, 

segments of the chemical manufacturing industry, iron and steel, metal casting, and pulp 

and paper—do energy costs represent more than 3 percent of the industry’s annual value 

of shipments.c

 This reality minimizes institutional incentives to devote organizational 

resources to pursuing energy efficiency opportunities. 

Regulatory Barriers to Environmentally Preferable Energy Outcomes 

Regulations also may limit broader application of energy efficiency and clean energy 

technologies and impede the achievement of environmentally preferable energy outcomes in 

manufacturing industries. Given EPA’s role in developing and coordinating regulations and 

policies aimed at improving environmental performance, this analysis focuses on regulatory 

barriers, describing four ways in which regulations—issued by EPA or other agencies—may 

create barriers to energy efficiency and clean energy improvement: 

• Regulations may fail to fully reward the environmental benefits associated with an energy 

efficiency opportunity, which restricts the potential for businesses to evaluate energy 

efficiency on an equivalent basis with other pollution control strategies such as add-on 

controls. 

• Regulations may lack procedural flexibility that allows pursuit of energy efficiency or 

cleaner fuel opportunities, particularly in areas where permitting changes are required to 

implement an opportunity. 

• The rulemaking process may fail to fully consider the energy implications of proposed 

regulations. 

• Regulations or policies may contribute to unfavorable market conditions for energy 

efficiency or clean energy opportunities. 

Sector Opportunity Assessment 

For each sector, the report assesses the viability of the five key energy efficiency and clean 

energy opportunities discussed above, given the financial, technical, institutional and regulatory 

barriers facing each sector. The analysis ranks the viability of each opportunity as “low,” 

“medium,” or “high” based on a qualitative assessment of the magnitude of relevant barriers, 

rather than a quantitative assessment of energy-savings potential. Table 1 provides a summary 

of the opportunity assessment rankings for each sector. 

Table 1: Sector opportunity assessment summary table 

Sector Opportunities 

 Cleaner 

Fuels 

Combined 

Heat and 

Power 

Equipment 

Retrofit/ 

Replacement 

Process 

Improvement 

Research 

and 

Development 

Alumina and aluminum Low Low Medium Medium Medium 

Cement Medium Low High High Medium 

Chemical manufacturing Medium High Medium Medium Medium 

Food manufacturing Medium High Medium High Medium 

See Table 9 for energy intensity metrics for each sector, including energy costs per dollar value of shipments. 

U.S. Environmental Protection Agency ES-4 March 2007 

c 
Executive Summary 

Sector Opportunities 

 Cleaner 

Fuels 

Combined 

Heat and 

Power 

Equipment 

Retrofit/ 

Replacement 

Process 

Improvement 

Research 

and 

Development 

Forest products Medium Low Medium High High 

Iron and steel 

 Integrated steelmaking Low Medium Low Medium High 

 EAF steelmaking Low Low Low Medium High 

Metal casting Low Low Medium Medium Medium 

Metal finishing Low Medium Medium High Medium 

Motor vehicle manufacturing Low Low Medium High Medium 

Motor vehicle parts manufacturing Low Low Medium High Low 

Petroleum refining Low High Medium Medium Medium 

Shipbuilding and ship repair Low Low High High Low 

A key observation from this table is that the viability of a given energy efficiency or clean energy 

opportunity varies from sector to sector. In addition, for any given manufacturing facility the 

viability of an opportunity will depend on facility-specific characteristics and operating conditions. 

Additional findings from the sector opportunity assessment include the following: 

• Cleaner fuels. Given the technical, financial, and regulatory constraints on fuel-switching, 

the extent of cleaner fuels opportunities is somewhat limited. However, renewable 

biomass fuels in the forest products industry, bio-waste in the food manufacturing 

industry, byproduct fuels in the chemical manufacturing industry, and waste fuels in the 

cement industry may represent opportunities for improved environmental performance as 

well as opportunities for reducing the cost of purchased energy for manufacturing 

industries. 

• CHP. For sectors with high process thermal loads such as chemical manufacturing, food 

manufacturing, and petroleum refining, a key opportunity for reducing fuel use and 

associated CAP and CO2 emissions lies with onsite generation of thermal and electric 

energy. In sectors that already meet the majority of their thermal or electric energy 

requirements with CHP, like the forest products industry, future opportunities may be 

limited. 

• Equipment retrofit/replacement. Reduced fuel use through increased boiler efficiency 

represents an opportunity to reduce energy-related emissions across multiple sectors, as 

boilers are among the largest sources of CAP and CO2 emissions in the industries 

covered in this analysis. According to National Emissions Inventory (NEI) data, the sectors 

with the largest energy-related CAP emissions from boilers are forest products, chemical 

manufacturing, and food manufacturing. 

• Process improvement. Sectors with relatively low energy use and associated emissions 

represent smaller areas of opportunity for energy-related environmental improvement. Key 

energy-savings opportunities in these sectors lie with implementation of best practices in 

energy management as well as with energy efficiency upgrades to electric motors and 

compressed air systems, facility lighting, and HVAC systems. 

U.S. Environmental Protection Agency ES-5 March 2007 
Executive Summary 

• R&D. Transformational technologies and processes can potentially yield substantial 

energy savings in sectors such as forest products and iron and steel. In forest products, 

technologies to reduce drying needs in papermaking, improve fuel concentration in 

recovery boilers, and increase fuel efficiencies in lime kilns are among the most promising 

R&D opportunities. New technologies under development in iron and steel include molten 

oxide electrolysis, ironmaking by flash smelting using hydrogen, and the paired straight 

hearth furnace. 

Policy Options 

Based on the evaluation of clean energy opportunities and the potential barriers to those 

opportunities, as well as EPA’s goal to promote environmentally preferable energy outcomes, 

the report outlines policy options EPA could pursue to address regulatory barriers to energy 

efficiency and clean energy investment. We offer the following policy options for discussion— 

both internal to EPA and involving coordination with other agencies—noting that the Agency will 

determine the definitive actions it intends to undertake: 

• Develop and promote broader application of regulations that recognize the 

emission reductions resulting from increased energy efficiency. Create additional 

mechanisms for energy efficiency to serve as a pollution control strategy through the 

following regulatory approaches: 

– Promoting broader use of output-based emissions standards that account for CHP 

technology’s thermal and electric energy output. 

– Promoting broader use of output-based emissions standards in regulations governing 

other combustion processes such as energy-generating and manufacturing process 

equipment. 

• Increase procedural flexibility to promote environmentally preferable energy use. 

Address permit-related barriers to reducing energy-related emissions on a system-wide 

level through the following activities: 

– Expanding flexible permitting opportunities that promote reductions in energy-related 

emissions as part of a pollution prevention strategy, including developing a flexible 

permitting rule. 

– Promoting broader recycling of wastes and process byproducts for energy recovery. 

– Providing assistance to the regulated community as well as state and local permitting 

authorities in support of efforts to increase procedural flexibility in environmental 

regulations, including technical guidance on evaluating energy-related environmental 

tradeoffs at a system-wide level. 

• Promote broader consideration of energy implications of rulemakings. Review 

methodologies currently used to assess energy impacts during the rulemaking process, 

assess how program offices are interpreting/implementing these provisions, and work 

across the Agency to develop a cohesive EPA position on how such impacts should be 

assessed and weighed against other Agency priorities. 

• Promote the development of more favorable market conditions for energy efficiency 

and clean energy technologies. Strengthen policy support for energy efficiency and 

clean energy technologies by conducting the following activities: 

– Coordinating across federal agencies to support policies that promote the market 

viability of energy efficiency and clean energy technologies. 

U.S. Environmental Protection Agency ES-6 March 2007 
Executive Summary 

– Offering additional grants to support clean energy applications in manufacturing 

industries. 

– Analyzing the environmental impacts of utility demand response programs and working 

to promote clean energy technologies as a strategy to reduce electricity demand. 

• Provide additional incentives and assistance through a sector-based approach. 

Promote environmentally preferable energy outcomes in manufacturing industries through 

the following mechanisms: 

– Supporting energy efficiency and clean energy R&D opportunities through informationsharing and recognition of industry achievements. 

– Providing information regarding financial incentives that are available to support energy 

efficiency and clean energy opportunities, particularly for small businesses. 

U.S. Environmental Protection Agency ES-7 March 2007 
This page deliberately left blank. 
1. Introduction 

1.1 Objectives 

EPA’s Sector Strategies Division (SSD) within the 

Office of Policy, Economics, and Innovation (OPEI) Chapter 1. Introduction 

commissioned this analysis to meet the following 1.1 Objectives 

objectives: 1.2 Methodology 

• Facilitate a general understanding of current 1.3 Organization of the Report 

energy usage and expected future energy 

consumption trends within 12 selected industrial 

manufacturing sectors. 

• Assess where opportunities exist within these sectors to increase energy efficiency and use 

less emissions-intensive energy sources, resulting in improved environmental performance. 

• Identify barriers to achieving improved environmental performance with respect to sector 

energy use, with a particular emphasis on regulatory barriers. 

• Propose policy options EPA could pursue to address such regulatory barriers, promoting 

energy efficiency and less emissions-intensive energy sources in these 12 sectors. 

It is important to note that this report is an analytical document and does not convey Agency decisions. 

The report’s findings and policy options are based on the available data used in this analysis. 

1.2 Methodology 

1.2.1 Sectors Addressed in This Analysis 

Using North American Industry Classification System (NAICS) codes, 12 industrial 

manufacturing sectors are addressed in this analysis, as shown in Table 2. 

Table 2: Manufacturing sectors addressed in this analysis 

Sector

Alumina and aluminum 

Cement

Chemical manufacturing 

Food manufacturing 

Forest productsd

Iron and steel 

Metal casting 

Metal finishing 

Motor vehicle manufacturinge

Motor vehicle parts manufacturing 

Petroleum refining 

Shipbuilding and ship repair 

NAICS 

3313 

327310 

325 

311 

 321, 322 

331111 

3315 

332813 

33611 

3363 

32411, 324110 

336611 

d Where data are available, this analysis provides detail on the two major subsectors of the forest products industry: pulp and 

paper and wood products. 

e Motor vehicle manufacturing (NAICS 33611) refers to automobile and light duty motor vehicle manufacturing and assembly. 

U.S. Environmental Protection Agency 1-1 March 2007 
Introduction 

Eight of these sectors—cement, chemical manufacturing (specifically, paint and coatings and 

specialty-batch chemicals), food manufacturing (specifically, agribusiness), iron and steel, metal 

casting, metal finishing, forest products, and shipbuilding and ship repair—currently participate 

in the Division’s Sector Strategies Program, which uses collaborative partnerships to promote 

widespread improvement in environmental performance with reduced administrative burden. 

Together, these 12 sectors represent a broad cross-section of the industrial manufacturing 

economy, and energy usage in these sectors constitutes a substantial fraction of total industrial 

energy demand in the United States. Energy-related environmental impacts include carbon 

emissions that contribute to climate change and criteria air pollutant (CAP) emissions that 

degrade local and regional air quality, potentially affecting attainment of National Ambient Air 

Quality Standards under the Clean Air Act. 

Assessing energy usage trends and associated environmental impacts, as well as the viability of 

specific energy efficiency and clean energy opportunities, enables us to envision 

environmentally preferable energy outcomes. Understanding the ways in which regulations and 

statutes potentially create barriers to energy efficiency and clean energy investment suggests 

policy options EPA could pursue to promote environmentally preferable energy outcomes. 

1.2.2 Data Sources and Caveats 

This analysis relies on the best available and most recent public data sources in the following 

areas: 

• Historical and current energy consumption data: 

– Annual Energy Review (2005): For an overview of U.S. and industrial energy 

consumption trends, we relied on the most recent annual report containing historical 

energy statistics from 1949 to the present produced by the U.S. Department of 

Energy’s (DOE) Energy Information Administration (EIA). 

– Manufacturing Energy Consumption Survey (MECS) (1998 and 2002): For detailed 

sector energy consumption data, including fuel use and energy intensity, we relied 

upon the two most recent issues of EIA’s survey of manufacturing energy use, which is 

conducted every four years. 

• Energy-related emissions data: 

– National Emissions Inventory (NEI) (2002): Data runs were conducted using the NEI 

database (ALLNEI_CAP dataset), prepared by EPA’s Emission Factor and Inventory 

group within the Office of Air Quality Planning and Standards, to produce sector-level 

data on energy-related emissions of CAPs, including sulfur dioxide, nitrogen oxides, 

particulate matter, and volatile organic compounds. 

– As NEI does not contain data on greenhouse gas (GHG) emissions, we also reference 

CO2 emissions projections from the Scenarios for a Clean Energy Future (CEF) report 

and DOE’s most recent Annual Energy Outlook (AEO, described below under “Energy 

consumption projections”). Though EPA has compiled a Greenhouse Gas Inventory 

(April 2006) that includes some of the sectors addressed in this analysis, we used DOE 

sources for carbon emissions because they entail projections of future carbon 

emissions under business-as-usual and environmentally preferable energy scenarios. 

• Economic data: 

– Annual Survey of Manufacturers (2001 and 2004): U.S. Census Bureau data on 

economic production (in terms of value added and value of shipments) by sector were 

U.S. Environmental Protection Agency 1-2 March 2007 
Introduction 

obtained for the years 1997 to 2004. These sources also provided data on annual 

energy expenditures by sector. 

– CenStats Databases, County Business Patterns (2004): Information on the total 

number of establishments in each sector was obtained from the Census Bureau’s 

online searchable CenStats databases. 

• Energy consumption projections: 

– Scenarios for a Clean Energy Future (2000): This CEF report was commissioned by 

DOE with research conducted by the Interlaboratory Working Group for EnergyEfficient and Clean Energy Technologies. We used the report’s reference case and 

advanced energy case projections to illustrate how sector energy consumption trends 

might be different under what EPA considers an “environmentally preferable” energy 

scenario as compared to a business-as-usual energy scenario.f 

– Annual Energy Outlook (2006): For an overview of expected future trends for industrial 

energy consumption and associated CO2 emissions, as well as energy projections for 

specific sectors, we referenced EIA’s most recent annual forecast of energy demand, 

supply, and prices through 2030. We also used the sector-specific projections of AEO 

2006 to identify areas where recent energy trends may be expected to produce 

different outcomes than those projected by CEF in 2000. 

– Natural Gas Outlook to 2020 (2005): This analysis was produced by the American Gas 

Foundation and contains consumption projections for certain industrial sectors that are 

heavily dependent on natural gas.g 

• Energy efficiency and clean energy opportunities for industrial manufacturing 

industries: 

– Trade associations: We consulted a number of online and hard copy materials 

produced by industry trade associations that describe technological and process 

opportunities for increasing energy efficiency. 

– Voluntary programs: Industry commitments to environmental improvement with respect 

to energy use—particularly through federal public-private partnership programs such 

as Climate VISION, which is supported by DOE, EPA, and the U.S. Departments of 

Transportation and Agriculture, and DOE’s Industrial Technologies Program—were 

reviewed for information on emerging industrial energy-efficient and clean energy 

opportunities for energy-intensive sectors, including developing technologies. Note that 

individual companies/facilities within each sector may also participate in other voluntary 

programs (e.g., ENERGY STAR, Performance Track, Climate Leaders, etc.); it was not 

the goal of this paper to research and reflect those individual commitments. 

– National laboratories: A number of national laboratory reports pertaining to industrial 

energy consumption were also reviewed and referenced in this analysis. 

f Clean Energy Future projections were available for 8 of the 12 sectors addressed in this analysis: alumina and aluminum, 

cement, chemical manufacturing, food manufacturing, forest products, iron and steel, metal casting, and petroleum refining. 

g Natural Gas Outlook projections were available for the following sectors: chemical manufacturing, food manufacturing, iron 

and steel, petroleum refining, and pulp and paper (within forest products). 

U.S. Environmental Protection Agency 1-3 March 2007 
Introduction 

• Regulatory barriers to energy efficiency and clean energy improvement: 

– Trade associations: We collected anecdotal information from the regulated community 

and reviewed industry trade association materials to identify key concerns with respect 

to federal, state, and local regulations that may pose barriers to energy efficiency or 

clean energy improvement. 

– Government publications: We also reviewed several analyses produced by federal 

regulatory agencies, including EPA, and national laboratories that discuss potential 

regulatory barriers to energy efficiency or clean energy improvement. 

Though our research involved a thorough review of the most commonly referenced, publicly 

available information sources regarding energy consumption and associated environmental 

impacts, as well as energy efficiency and clean energy opportunities for industrial manufacturing 

sectors, this analysis did not involve an exhaustive literature search. Other important caveats 

regarding the data sources used in this analysis include the following: 

• Sectors included in this analysis are defined according to the NAICS codes shown in 

Table 2. In some cases, the data sources consulted in this analysis do not align exactly 

with these sector definitions. In such instances, we use the closest available NAICS 

category to EPA’s sector definition and note such differences between EPA’s and the 

source’s sector definition in a footnote. 

• Though the 2002 Manufacturing Energy Consumption Survey provides the most detailed 

data on sector energy consumption, energy prices have undergone major changes in the 

last four years, and the effects of such changes on sector energy consumption are not 

reflected in the 2002 MECS or other data sources used in this analysis. 

• Scenarios for a Clean Energy Future provides the best available mechanism for 

illustrating how sector energy consumption might differ under an environmentally 

preferable energy scenario versus a business-as-usual scenario. At the same time, the 

study was produced in 2000 and thus does not reflect recent changes in economic 

production, energy prices, and technology advancements that affect industrial energy 

consumption. 

• In this analysis, we seek to provide a structure for understanding the ways in which 

regulations can potentially serve as barriers to energy efficiency and clean energy 

improvement in industrial manufacturing sectors. Our research into regulatory barriers has 

focused on collecting anecdotal reports from the regulated community obtained through 

interviews with industry representatives and through a literature review, rather than a 

systematic survey approach. 

• Our analysis of energy-related environmental impacts focuses primarily on a sector-bysector assessment of potential changes in energy-related air emissions that could occur 

under business-as-usual and environmentally preferable energy scenarios. The report 

uses energy-related CAP emissions from the NEI database (where available). It also 

includes a more general assessment of opportunities to reduce GHG emissions, focusing 

on carbon dioxide. The report does not include emissions of hazardous air pollutants, or 

water or waste impacts resulting from energy use. 

• The report first presents general trends in industrial energy consumption, and then current 

and future energy consumption and fuel use trends within each sector. It is important to 

note that this report indicates the amount of purchased electricity used by each sector, but 

does not attempt to quantify indirect energy-related emissions resulting from the 

U.S. Environmental Protection Agency 1-4 March 2007 
Introduction 

production of electricity by offsite electrical generating units. In other words, the energyrelated emissions discussed in this report refer only to onsite emissions at industrial 

facilities. 

• The analysis focuses on fuel inputs for energy use only and does not address feedstock 

fuel use. While some figures in the report represent total energy consumption data, which 

includes fuels used as feedstocks (i.e., raw material inputs in the manufacturing process), 

feedstock energy inputs may or may not contribute to CAP and GHG emissions. As 

feedstock fuel use does not represent an opportunity for reducing the environmental 

impacts associated with energy consumption, the reports focuses on energy inputs for fuel 

use only. 

1.2.3 Organization of the Report 

The major sections of this report are organized as follows, within “Insights” text boxes where 

appropriate: 

• Chapter 2, Current Energy Consumption, characterizes sector energy consumption within 

the context of U.S. energy demand, assessing sector energy requirements in terms of fuel 

inputs, energy intensity, and end use applications. In assessing how energy is used and 

lost in industrial manufacturing processes, the section identifies five key opportunities for 

improving environmental performance with respect to energy consumption—cleaner fuels, 

combined heat and power, equipment retrofit/replacement, process improvement, and 

research and development. In addition, this section provides a broad overview of the 

environmental and economic context surrounding sector energy usage. 

• Chapter 3, Sector Energy Scenarios, builds upon the overview of sector energy 

consumption, environmental impacts, and economic context developed in Chapter 2 and 

the energy projections described in Chapter 3 to develop “base case” and “best case” 

energy scenarios for each of the 12 sectors addressed in this analysis. The sections on 

each sector include the following: 

– A “situation assessment” that provides a general overview of the sector and describes 

key factors affecting sector energy use. 

– A “base case” energy scenario that describes (1) the expected future trend for sector 

energy consumption and (2) associated environmental impacts. 

– A “best case” energy scenario that assesses (1) key opportunities for improving 

environmental performance with respect to sector energy consumption, (2) potential 

barriers to implementing such opportunities, and (3) the ways in which an 

environmentally preferable energy scenario would differ from the “base case” scenario 

in terms of energy consumption and associated environmental impacts. 

• Chapter 4, Barriers to Environmentally Preferable Energy Outcomes, provides an 

overview of financial, technical, institutional, and regulatory barriers to energy efficiency 

and clean energy improvement in industrial manufacturing sectors. In a focus on 

regulatory barriers, the chapter identifies key ways in which regulations can present 

barriers to investment in energy efficiency and clean energy opportunities. 

• Chapter 5, Policy Options, sets forth possible actions EPA could take to address the 

regulatory barriers to energy efficiency and clean energy improvement discussed in 

Chapter 4. 

• Appendix A, Energy Projections, provides an overview of the energy projections employed 

to develop business-as-usual versus environmentally preferable energy scenarios for the 

U.S. Environmental Protection Agency 1-5 March 2007 
Introduction 

12 sectors considered in this analysis. The appendix highlights key similarities and 

differences between the projections and includes a brief discussion of expected future 

trends in industrial energy consumption. 

U.S. Environmental Protection Agency 1-6 March 2007 
2. Current Energy Consumption 

2.1 U.S. Energy Overview 

This section provides an overview of historical 

industrial energy consumption and fuel use trends 

within the larger context of U.S. energy demand, 

comparing industrial trends with commercial and 

residential energy consumption trends to illustrate key 

points that distinguish industrial energy consumption 

and fuel usage from that of other end use categories. 

Insights 

During the past 35 years, the transition away from heavy industry and towards the commercial 

and service sectors has contributed to slower energy consumption growth in the industrial 

sector than in other sectors of the U.S. economy. At the same time, the industrial sector remains 

the largest end user of energy, and reducing energy consumption in energy-intensive 

manufacturing industries offers opportunities for improving environmental performance as well 

as reducing operational costs in an increasingly competitive global marketplace. 

Chapter 2. Current Energy Consumption 

2.1 U.S. Energy Overview 

2.2 Sector Energy Overview 

2.3 Environmental Context 

2.4 Economic Context 

2.1.1 Long-Term Energy Consumption Trends 

A comprehensive overview of historical energy consumption trends from 1949 through 2005 is 

provided in the Annual Energy Review compiled by the Energy Information Administration (EIA) 

within the U.S. Department of Energy (DOE). Using data from the 2005 Annual Energy Review, 

Figure 1 shows U.S. energy consumption trends since 1970 across the following end use 

categories: industrial, transportation, residential, and commercial. 

Figure 1: U.S. energy consumption trends 1970-2005: 

comparison of industrial, transportation, residential, and commercial end uses2

0 

5,000 

10,000 

15,000 

20,000 

25,000 

30,000 

35,000 

40,000 

1970 

1975 

1980 

1985 

1990 

1995 

2000 

2005 

Trillio

n Btu (T

Btu) 

Residential 

Commercial 

Industrial 

Transportation 

U.S. Environmental Protection Agency 2-1 March 2007 
Current Energy Consumption 

Total energy consumption across 

all end uses has increased since Energy Consumption Terminology 

1970, but industrial energy • Delivered energy (also called “site energy”) is the amount of energy consumption has shown the consumed at the facility level (purchased electricity and fossil fuel 

slowest growth over the period, inputs as well as onsite renewable energy generation). It does not 

increasing at an annual rate of include losses from offsite energy generation, transmission, and 

0.35 percent from 1970 to 2004.h distribution. EIA’s Manufacturing Energy Consumption Survey (MECS) 

Over the same period, total data presented in this report are in terms of delivered energy 

commercial energy consumption consumption. 

has more than doubled, with an • Primary energy refers to energy consumed onsite plus the total 

annual growth rate of 2.1 percent, amount of fuels used to generate energy offsite (i.e., by the electric 

and annual growth rates for power generating sector). Thus, it includes energy losses from offsite 

energy consumption in the energy generation, transmission, and distribution. 

transportation and residential • Total energy is primary energy plus the amount of energy consumed 

sectors were 1.6 and 1.3 percent, by the electricity-generating sector to meet its own energy needs, 

respectively. At the same time, which is allocated to the end use sectors (industrial, commercial, and 

total industrial energy residential). Energy consumption data from EIA’s Annual Energy 

consumption has remained Review in Section 2.1.1 are in total energy terms. 

greater than total energy Source: DOE, Indicators of Energy Intensity in the United States. 

consumption in the other end use Available at http://intensityindicators.pnl.gov/terms_definitions.stm#economy. 

categories.i

 Industrial energy 

consumption has also shown greater responsiveness to energy price increases than the other 

categories, declining in 1975 and from 1980 to 1983 primarily in response to oil price spikes.3 

The trend of relatively flat industrial energy consumption compared with other end use sectors is 

primarily attributable to the U.S. economy’s overall shift away from traditional manufacturing 

industries towards the service and commercial sectors, and from energy-intensive industries 

towards industries with lower energy intensity, as well as to energy efficiency improvements 

within industrial manufacturing sectors. 

2.1.2 Fuel Consumption Trends 

Table 3 presents the fraction of total energy demand that is met by various energy sources and 

fuel types for each end use sector: industrial, commercial, residential, and transportation.j

 (Note 

that according to the 2005 Annual Energy Review, energy inputs for electricity production are 

approximately 50 percent coal, 19 percent nuclear, 16 percent natural gas, and 6 percent 

hydroelectric. The remaining energy inputs for electric power generation include petroleum, 

wood, waste, and other renewables such as wind, solar, and geothermal.)4 

h As indicated in the Energy Consumption Terminology sidebar, Annual Energy Review data are presented in total energy 

terms. As EIA’s 2005 data were preliminary at the time this report was written, 2004 data were used to calculate end use 

fractions of total U.S. energy consumption. Annual increases are the calculated average growth rate over the period. 

Delivered energy consumption by the transportation sector recently surpassed industrial delivered energy consumption. 

j Percentages were calculated using 2004 total energy consumption data. 

U.S. Environmental Protection Agency 2-2 March 2007 

i 
Current Energy Consumption 

Table 3: Fraction of total energy demand met by fuel type in 2004: 

comparison of residential, commercial, industrial, and transportation end uses5

Electricity Coal Coal Coke Natural Gas Petroleum Renewable TOTALk 

Industrial 33.5% 6.1% 0.4% 25.6% 29.3% 5.0% 99.9% 

Commercial 76.2% 0.6% 0.0% 18.2% 4.3% 0.8% 100.1% 

Residential 66.8% 0.1% 0.0% 23.6% 7.3% 2.3% 100.1% 

Transportation 0.3% 0.0% 0.0% 2.2% 96.5% 1.0% 100.0% 

It is important to note the following characteristics that distinguish industrial energy usage from 

that of other end use sectors, particularly residential and commercial energy consumption: 

• Electricity. The industrial sector is relatively less dependent on purchased electricity than 

the commercial and residential sectors, in part because industry produces a greater 

fraction of its own power through direct fuel inputs and, for some industries, through 

cogeneration. A form of cogeneration is combined heat and power (CHP), which produces 

thermal and electric energy from a single fuel source. CHP is a key energy efficiency 

opportunity for sectors with high process thermal and electricity loads (see Section 2.2.6), 

particularly the chemical manufacturing, food manufacturing, forest products, and 

petroleum refining sectors.l 

• Coal. Though still an important fuel source for some industries, coal use by the industrial 

sector has declined steadily since 1950 (when it was the largest fraction of industrial fuel 

inputs) to a relatively small fraction of industrial fuel inputs today.6

 Over the same period, 

coal use in electric power generation has grown rapidly (currently supplying more than 50 

percent of energy inputs for electric power generation), and thus represents an important, 

though indirect, source of energy for all three end use categories except transportation, 

particularly the commercial and residential sectors. 

• Natural gas. For the industrial sector, natural gas represents a larger fraction of total 

energy consumption than for other sectors, and industry is the largest end user of natural 

gas (see Figure 2 on page 2-4). Consequently, increasing natural gas prices are of 

particular concern for U.S. industry. In addition to fuel use, natural gas is also an important 

raw material in industries such as chemical manufacturing and petroleum refining. 

• Petroleum. Petroleum also represents a larger fraction of industrial energy inputs than it 

does for the commercial and residential sectors, and petroleum consumption by industry 

has increased steadily since 1950—only slightly slower than the rate of increase in the 

transportation sector.7

 However, a large fraction of industrial petroleum consumption is not 

for fuel use, but rather as raw material in industries like petroleum refining and chemical 

manufacturing. Off-road transportation in the mining, agriculture, and construction sectors 

represents another substantial component of industrial petroleum use. It is also important 

to note that the industrial petroleum consumption data in Table 3 do not capture petroleum 

inputs for offsite transportation of manufactured goods, as these energy inputs are 

included under the transportation sector. Though not considered in depth in this analysis, 

k For each row, sum of all columns may not equal 100% due to independent rounding. 

Additional sector-level data for onsite generation of electricity, including cogeneration and renewable power generation, is 

available through MECS tables 11.3 and 11.4, available at 

http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/excel/table11.3_02.xls. 

U.S. Environmental Protection Agency 2-3 March 2007 

l 
Current Energy Consumption 

fuels used in freight shipping represent an important energy input for manufacturing 

industries. 

• Renewables. The industrial sector is the largest user of renewable fuels, in part due to 

the extensive use of biomass fuels in the forest products industry. As is the case for coal, 

renewable energy is also represented in electricity supplied by utilities, meeting 

approximately 9 percent of the country’s electric power supply, primarily through 

hydropower. 

Focusing on more recent historical trends (1989 to 2005), and comparing industrial fuel 

consumption with fuel consumption in the other major end use categories, Figure 2 through 

Figure 5 present consumption trends for natural gas, petroleum, coal, and electricity, 

respectively. Trends are presented for the three main end use categories—industrial, 

residential, and commercial—with the following exceptions: (1) the coal consumption graph, 

Figure 4, compares three primary industrial uses of coal with all non-industrial end uses; and (2) 

the petroleum consumption graph, Figure 3, also includes the consumption trend for 

transportation end uses. 

Figure 2: Natural gas consumption 1989-2005: 

comparison of industrial, residential, and commercial end uses8

0 

2,000 

4,000 

6,000 

8,000 

10,000 

12,000 

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005 

TBtu 

Residential 

Commercial 

Industrial 

U.S. Environmental Protection Agency 2-4 March 2007 
1989 

1991 

1993 

1995 

1997 

1999 

2001 

2003 

2005 

Current Energy Consumption 

Figure 3: Petroleum consumption 1989-2005: 

comparison of industrial, transportation, residential, and commercial end uses9

0 

5,000 

10,000 

15,000 

20,000 

25,000 

30,000 

35,000 

1989 

1991 

1993 

1995 

1997 

1999 

2001 

2003 

2005 

TBtu 

Residential 

Commercial 

Industrial 

Transportation 

Figure 4: Coal consumption 1989-2005: 

comparison of industrial and non-industrial end uses10 m 

1 

10 

100 

1,000 

10,000 

100,000 

Industrial Coke 

Industrial CHP 

TBtu 

Industrial Other

Non-Industrial

m “Industrial coke” represents coal inputs used by industrial coke plants. “Industrial CHP” contains coal inputs for CHP 

applications and a small number of electricity-only coal plants. “Industrial Other” contains all other coal inputs in industrial 

applications. 

U.S. Environmental Protection Agency 2-5 March 2007 
Current Energy Consumption 

Figure 5: Purchased electricity consumption 1989-2005: 

comparison of industrial, residential, and commercial end uses11 

0 

500 

1,000 

1,500 

2,000 

2,500 

3,000 

3,500 

4,000 

4,500 

5,000 

1989 

1991 

199

1

9

1

9

1

99

2

0

2

0

2

0

3 

9

5 

9

7 

9

0

1 

0 3 

0 5 

TBtu 

Residential 

Commercial 

Industrial 

As this analysis is concerned with energy usage trends within 12 industrial manufacturing 

sectors, the preceding graphs highlight several important points regarding macro-level industrial 

energy consumption trends: 

• The industrial sector consumes more natural gas than other sectors, but industrial gas 

consumption trends are also more volatile than for other sectors. In some cases, price 

volatility in the natural gas market has contributed to decreasing industrial output as 

natural gas-dependent industries reduce production in response to escalating energy 

costs.12 For example, approximately 50 percent of U.S. methanol production capacity and 

40 percent of ammonia production capacity were idled in response to increasing natural 

gas prices after 2000.13 

• Industrial petroleum consumption is second only to transportation consumption, increasing 

at 1.3 percent annually from 1989 to 2004. However, as mentioned previously a 

substantial fraction of industrial petroleum consumption is not for fuel use but rather as a 

raw material in specific industries.n

 Off-road transportation in the mining, agriculture, and 

construction sectors represents another substantial component of industrial petroleum 

use. 

• Industrial coal consumption has fallen 2 percent annually from 1989 to 2004. Growth in 

non-industrial coal use is attributable to expansion of coal use for electric power 

generation, which has increased steadily since 1950.14 

• Residential and commercial consumption of purchased electricity exceeded industrial 

consumption in the mid 1990s. Industrial electricity consumption has remained fairly 

steady, growing at an annual rate just under 0.4 percent from 1989 to 2004. 

n EIA petroleum consumption data include feedstock use. According to 2004 data, 35 percent of industrial petroleum 

consumption was categorized as “other petroleum,” which is defined as: “Pentanes plus petrochemical feedstocks, still gas 

(refinery gas), waxes, and miscellaneous products. Beginning in 1964, [other petroleum] also includes special naphthas. 

Beginning in 1983, [other petroleum] also includes crude oil burned as fuel.” 

U.S. Environmental Protection Agency 2-6 March 2007 
Current Energy Consumption 

It is important to note that as the figures in this section are based on total energy consumption 

data, they include energy used as feedstocks or raw material inputs in the manufacturing 

process. Although some manufacturing industries have minimal feedstock energy use, fuels are 

an important raw material for certain industries. For example, natural gas and petroleum 

feedstocks are critical to chemical manufacturing and petroleum refining, and both coal and 

coke are important feedstocks used in iron and steel production. However, feedstock energy 

inputs may or may not contribute to criteria air pollutant (CAP) and greenhouse gas (GHG) 

emissions, depending on the specific process in which the feedstock is used, and whether the 

potential emissions are embedded in the final product. In addition, feedstock inputs do not 

represent an opportunity for reducing the environmental impacts associated with energy 

consumption. As the objective of this report is to support the development of strategies for 

reducing CAP and GHG emissions stemming from energy consumption, the remainder of this 

analysis focuses on energy inputs for fuel use only and does not address feedstock energy use. 

U.S. Environmental Protection Agency 2-7 March 2007 
Current Energy Consumption 

2.2 Sector Energy Overview 

Insights 

To develop effective sector-level energy management strategies for promoting preferred 

environmental outcomes, it is important to understand multiple energy usage characteristics: 

total energy usage, fuel mix, energy intensity, and the relative magnitude of end use 

applications of energy. 

2.2.1 Delivered Energy 

Within the constraints of data availability (as noted in table footnotes), Table 4 presents in 

descending order each sector’s energy consumption and energy intensity data compiled in 

EIA’s most recent (2002) MECS, which is produced every four years. While the 2002 MECS is 

the most recent and comprehensive data set addressing energy consumption across the 

sectors considered in this analysis, it is important to note that energy trends since 2002—most 

notably price increases for petroleum-based fuels and natural gas—have affected energy 

consumption across these sectors. Current energy consumption in some sectors (e.g., iron and 

steel, forest products, and some components of the chemical manufacturing industry) is likely to 

be lower than 2002 values as production has declined in light of energy cost trends and other 

economic factors. 

Energy consumption data represent annual fuel-related energy inputs. Energy intensity is the 

ratio of fuel-related energy consumption to economic production in terms of dollar value of 

shipments and will be discussed in greater detail in Section 2.2.4. 

Table 4: Sector energy consumption and energy intensity in 200215 

NAICS Sector Energy Consumption 

(TBtu) 

Energy Consumption per 

Dollar Value of Shipments 

(thousand Btu (KBtu)) 

325 Chemical manufacturing 3,769 8.5 

324110 Petroleum refining 3,086 16.1 

322 Pulp and paper (within forest products) 2,361 15.2 

331111 Iron and steel 1,455 27.8 

311 Food manufacturing 1,116 2.6 

336 Transportation equipmento 424 0.7 

327310 Cement 409 56.0 

332 Fabricated metal productsp 387 1.7 

321 Wood products (within forest products) 375 4.2 

3313 Alumina and aluminum 351 12.2 

3315 Metal castingq 157 5.6 

o As MECS does not contain sector-level data for motor vehicle manufacturing (NAICS 33611), motor vehicle parts 

manufacturing (NAICS 3363), or shipbuilding and ship repair (NAICS 336611), in Table 4 through Table 8 these three 

sectors are represented by the larger NAICS category, transportation equipment (NAICS 336). 

p As MECS does not contain sector-level data for metal finishing (NAICS 332813), in Table 4 through Table 8 this sector is 

represented by the larger NAICS category, fabricated metal products (NAICS 332). 

q MECS data refer to NAICS 3315 as “foundries.” 

U.S. Environmental Protection Agency 2-8 March 2007 
Current Energy Consumption 

In general, the sectors shown in Table 4 with the largest energy requirements are also highly 

energy-intensive, as is the case for petroleum refining, pulp and paper, and iron and steel. 

However, some less energy-intensive sectors such as food manufacturing also have substantial 

energy requirements. 

• Energy-intensive industries generally seek to control energy costs by investing in energy 

efficiency to the degree possible within capital constraints and competition with other uses 

for capital. It is possible that the easiest energy efficiency opportunities have already been 

exploited by these industries,r

 but the business case for energy efficiency improvement is 

also more clear-cut when energy represents a relatively larger fraction of production costs. 

• For less energy-intensive industries with high energy usage, multifaceted energy 

efficiency strategies may be needed due to the wider range in energy end uses within 

these sectors and typically fewer business incentives to control energy costs through 

increased energy efficiency. 

Energy consumption and energy intensity data do not present the full picture of sector energy 

use and associated emissions. In assessing the environmental impacts associated with energy 

consumption, fuel mix is of particular importance, as will be discussed in following sections. In 

addition, some sectors have unique energy consumption characteristics that distinguish them 

from other manufacturing industries, which also have implications in terms of energy-related 

emissions. For example, the forest products industry (pulp and paper and wood products) meets 

more than half of its energy requirements with renewable biomass fuels that are manufacturing 

process byproducts. A strategic approach to promoting energy efficiency within the industrial 

sector would ideally address the largest end users of energy but also consider energy intensity 

and other energy usage factors such as fuel mix. 

2.2.2 Energy Consumption by Fuel Type 

In addition to affecting energy-related air emissions, fuel mix is also important in terms of 

understanding how sectors may respond to changing fuel prices. Table 5 presents MECS 2002 

data on annual fuel inputs by sector (energy use as fuel only, not including feedstock energy 

inputs). Table 6 presents the same data as a fraction of each sector’s total fuel energy 

consumption, with the two largest fuel input fractions highlighted in gray. For comparison 

purposes in both tables, the line “All Industrial Codes with Figures” provides total fuel usage for 

all industries included in the MECS survey, including those sectors that are the subject of this 

analysis. 

r A recent paper published by the American Council for an Energy-Efficient Economy, Ripe for the Picking: Have We 

Exhausted the Low-Hanging Fruit in the Industrial Sector? offers a detailed discussion of whether all easy energy efficiency 

opportunities have already been exploited for the industrial sector. Available at http://aceee.org/. 

U.S. Environmental Protection Agency 2-9 March 2007 
Current Energy Consumption 

Table 5: Sector energy consumption by fuel type in 200216 s t 

NAICS Sector 

Total 

(TBtu)u 

Net 

Electricityv 

(TBtu) 

Residual 

Fuel Oil 

(TBtu) 

Distillate 

Fuel Oil 

(TBtu) 

Nat. Gas 

(TBtu) 

LPG & 

NGLw 

(TBtu) 

Coal 

(TBtu) 

Coke & 

Breeze 

(TBtu) 

Otherx 

(TBtu) 

All Industrial Codes with Figures 16,276 2,839 211 142 5,794 103 1,182 574 5,431 

325 Chemical manufacturing 3,769 522 43 14 1,678 37 314 1 1,158 

324110 Petroleum refining 3,086 121 21 5 821 20 1 0 2,097 

322 Pulp and paper (within forest 

products) 

2,361 223 100 13 504 6 234 4 1,276 

331111 Iron and steel 1,455 184 1 10 388 * 36 526 311 

311 Food manufacturing 1,116 230 13 19 575 5 184 1 90 

336 Transportation equipment 424 172 6 3 203 4 8 0 28 

327310 Cement 409 43 1 6 21 * 236 8 95 

332 Fabricated metal products 387 161 Q 6 209 3 1 Q 2 

321 Wood products (within forest 

products) 

375 72 1 10 57 5 1 0 229 

3313 Alumina and aluminum 351 193 * 1 130 1 0 * 26 

3315 Metal casting 157 54 * 1 77 1 1 23 * 

s In Tables 4 through 7 that report MECS data, we have used the “missing data” symbols used in MECS data tables. MECS 

defines these symbols as follows: *=estimate less than 0.5; W=Withheld to avoid disclosing data for individual 

establishments; and Q=Withheld because Relative Standard Error (RSE) is greater than 50 percent. 

t As noted by EIA, double-counting of fuel inputs may occur when the thermal energy content of an energy input is not 

completely consumed for the production of heat, power, or electricity generation. These residual energy leftovers may be 

subsequently consumed for fuel purposes (for example, in steel manufacturing, blast furnace gas may be recovered as a 

byproduct from coke and other inputs that were not completely consumed and used as fuel). In such cases, fuel 

consumption estimates will be inflated. 

u Total column may not equal the sum of rows for one or more of the following reasons: (1) data on individual fuel inputs may 

be withheld for reasons noted in previous footnote; or (2) independent rounding of fuel input data. 

v “Net electricity” value is obtained by summing electricity purchases, transfers in, and generation from noncombustible 

renewables, and subtracting quantities of electricity transferred and sold. Thus, it provides a rough approximation of 

purchased power. 

w Liquefied petroleum gases (LPG) and natural gas liquids (NGL). 

x “Other” includes net steam (the sum of purchases, generation from renewables, and net transfers) and other energy that 

respondents indicated was used to produce heat and power. 

U.S. Environmental Protection Agency 2-10 March 2007 
Current Energy Consumption 

Table 6: Sector fuel inputs as fraction of total energy requirements in 200217 

NAICS Sector Totaly Net Electricity 

Residual 

Fuel Oil 

Distillate 

Fuel Oil Nat. Gas 

LPG & 

NGL Coal 

Coke & 

Breeze Other 

All Industrial Codes with Figures 100.0% 17.4% 1.3% 0.9% 35.6% 0.6% 7.3% 3.5% 33.4% 

325 Chemical manufacturing 99.9% 13.8% 1.1% 0.4% 44.5% 1.0% 8.3% 0.0% 30.7% 

324110 Petroleum refining 100.0% 3.9% 0.7% 0.2% 26.6% 0.6% 0.0% 0.0% 68.0% 

322 Pulp and paper (within forest 

products) 

100.0% 9.4% 4.2% 0.6% 21.3% 0.3% 9.9% 0.2% 54.0% 

331111 Iron and steel 100.1% 12.6% 0.1% 0.7% 26.7% * 2.5% 36.2% 21.4% 

311 Food manufacturing 100.1% 20.6% 1.2% 1.7% 51.5% 0.4% 16.5% 0.1% 8.1% 

336 Transportation equipment 100.0% 40.6% 1.4% 0.7% 47.9% 0.9% 1.9% 0.0% 6.6% 

327310 Cement 100.2% 10.5% 0.2% 1.5% 5.1% * 57.7% 2.0% 23.2% 

332 Fabricated metal products 98.7% 41.6% Q 1.6% 54.0% 0.8% 0.3% Q 0.5% 

321 Wood products (within forest 

products) 

100.0% 19.2% 0.3% 2.7% 15.2% 1.3% 0.3% 0.0% 61.1% 

3313 Alumina and aluminum 100.0% 55.0% * 0.3% 37.0% 0.3% 0.0% * 7.4% 

3315 Metal casting 100.0% 34.4% * 0.6% 49.0% 0.6% 0.6% 14.6% * 

As indicated by the “All Industrial Codes with Figures” data, the sectors shown in the above 

tables account for approximately 85 percent of all industrial energy consumption reported to 

MECS in 2002. The five sectors with the largest energy requirements—chemical manufacturing, 

petroleum refining, pulp and paper, iron and steel, and food manufacturing—represent more 

than 70 percent of all industrial energy consumption reported in the 2002 MECS. The following 

points are important to note about fuel consumption by these industrial manufacturing sectors: 

• The composition of the “other” category varies from sector to sector. For chemical 

manufacturing, “other” fuels include petroleum-derived byproduct gases and solids, woody 

materials, hydrogen, and waste materials.18 For petroleum refining, “other” fuels consist 

primarily of fuel gas generated in the refining process. For forest products (pulp and paper 

and wood products), “other” fuels are primarily biomass—black liquor, pulping liquor, and 

wood residues and byproducts—used to generate renewable energy. For iron and steel, 

the “other” category is largely composed of byproduct fuels such as coke oven gas and 

blast furnace gas (coal-based in origin).19 For the cement industry, “other” includes 

petroleum coke as well as waste materials that are incinerated for fuel, such as old tires 

and municipal solid waste.20 

• Petroleum consumption is detailed in three fuel categories: residual fuel oil, distillate fuel 

oil, and LPG/NGL (which contains both liquefied petroleum gas and natural gas liquids). 

Petroleum fuel inputs are relatively small for the sectors considered in this analysis (less 

than 3 percent of total fuel consumption shown in Table 5). Some additional petroleum 

inputs are contained in the “other” category. For petroleum refining and chemical 

manufacturing, these petroleum-based fuels are byproduct fuels. For cement and 

y Total column may not equal 100 percent for one or more of the following reasons: (1) for sectors that exported energy 

produced on site, it was not possible to subtract exported energy from fuel inputs, because MECS does not indicate which 

fuel was used to produce the exported energy (chemical manufacturing and iron and steel report energy shipments); (2) 

data on individual fuel inputs may be withheld for reasons noted in previous footnotes; or (3) independent rounding of fuel 

input data. 

U.S. Environmental Protection Agency 2-11 March 2007 
Current Energy Consumption 

aluminum, these fuels are petroleum coke. (Table 3 indicated that petroleum accounts for 

roughly 30 percent of total industrial energy consumption, but the majority of these inputs 

are used as feedstocks or for off-road transportation in sectors such as mining and 

construction, as mentioned in Section 2.1.2.) 

• Natural gas meets a substantial fraction of energy demand for nine of the sectors listed in 

the previous tables—an indication of the overall importance of natural gas to industrial 

manufacturing sectors. Accordingly, manufacturing industries are particularly sensitive to 

fluctuations in the price of natural gas. 

• For sectors with substantial coal consumption, the majority of coal inputs are used to 

power boilers and process equipment with large thermal energy requirements such as 

cement kilns. 

• Energy-related emissions associated with offsite electric power generation occur at the 

generating source (usually an electric utility), which means that for sectors where 

purchased electricity represents a large component of energy consumption (such as 

aluminum, food manufacturing, metal casting, metal finishing, motor vehicle 

manufacturing, and motor vehicle parts manufacturing), substantial energy-related 

emissions occur outside the facility. 

It is important to understand which fuel inputs represent the largest fraction of an industry’s 

energy demand in order to anticipate expected responses to rising energy costs, and it is also 

critical to understand the constraints on an industry’s capacity to shift from one energy source to 

another. Fuel-switching potential is discussed in the following Section 2.2.3. Possible future fuelswitching trends under “base case” and “best case” energy scenarios for each sector will be 

discussed in Chapter 3. 

2.2.3 Fuel-Switching Potential 

From an environmental perspective, one concern is that as natural gas prices increase, 

industries will switch away from natural gas towards more emissions-intensive energy sources 

such as coal. In the converse, environmentally preferable energy scenarios could involve 

switching from emissions-intensive energy sources such as coal toward less emissionsintensive energy sources. It is important to note that natural gas prices are sufficiently high at 

the present time that most facilities that can readily use coal or an alternative fuel are already 

using it. For existing facilities, switching from coal to natural gas is very difficult to justify on a 

cost basis, and promoting such fuel-switching is politically sensitive from a policy perspective. 

There are considerable constraints on an industrial facility’s ability to engage in fuel-switching, 

including technical constraints, regulatory constraints, and supply constraints.21 Fuel-switching 

ability also varies according to fuel type. For example, it is easier to switch from natural gas to 

petroleum than from natural gas to coal. On the technical side, switching from natural gas to 

coal requires major changes to fuel handling equipment and boilers. On the regulatory side, if a 

facility is permitted for natural gas, switching to coal would trigger New Source Review under 

the Clean Air Act. Supply constraints relate to the cost and availability of fuel substitutes, which 

vary according to the location of the facility in relation to fuel transportation infrastructure. 

Supply constraints reduce the magnitude of environmentally preferable switching potential (e.g., 

from coal to natural gas) as natural gas supply infrastructure may be unable to reliably meet the 

fuel requirements of large industrial applications, as well as the potential for environmentally 

detrimental fuel-switching due to transportation infrastructure constraints affecting coal. 

The MECS survey instrument asks respondents to indicate the amount of six major fuel inputs 

that could potentially be switched (within 30 days of the switching decision) to an alternate fuel 

U.S. Environmental Protection Agency 2-12 March 2007 
Current Energy Consumption 

given constraints imposed by existing equipment configurations and legal obligations such as 

binding supply contracts and environmental regulations.z

 Based on these survey responses, 

Table 7 summarizes data from the 2002 MECS on each sector’s potential to switch from natural 

gas to one of seven alternate fuel sources, and Table 8 summarizes similar data for coal. (Data 

do not include fuels consumed as feedstock.) In each Table, the first three columns show the 

fraction of each sector’s fuel consumption that could be switched to an alternate fuel source, as 

well as the fraction that is non-switchable, and the fraction that was unreported as either 

switchable or non-switchable. The remaining columns show the percentage of the switchable 

fuel fraction that could be met by each of the alternate fuels. (Note that there is double-counting 

in the alternate fuels columns—for example, a portion of the natural gas fraction could be 

switched to either distillate or residual fuel oil—so the sum of the alternate fuels columns will not 

equal 100 percent.) 

As we have done with other tables using MECS data, for comparison purposes we also report the 

totals for all industries included in the MECS survey, including those sectors that are the subject of 

this analysis. These data appear in the lines entitled “All Industrial Codes with Figures.” 

Table 7: Sector fuel-switching potential in 2002: natural gas to alternate fuels22 aa 

Natural Gas Switching Potential 

Alternate Fuels That Could Be Substituted for Natural Gas 

(shown as percentage of switchable fraction) 

NAICS Sector 

Switchable 

Fraction 

NonSwitchable 

Fraction 

NonReported 

Fraction 

Electric 

Receipts bb Distillate 

Fuel Oil 

Residual 

Fuel Oil LPG Coal 

Coke & 

Breeze Othercc 

All Industrial Codes with Figures 19% 63% 18% 10% 38% 22% 34% 4% 0% 7% 

3313 Alumina and aluminum 9% 77% 14% * 27% 9% 64% 0% 0% * 

327310 Cement 29% 62% 10% 17% 17% 33% 17% 67% 17% 17% 

325 Chemical manufacturing 10% 64% 26% 9% 45% 32% 13% Q 0% 7% 

332 Fabricated metal products Q 57% 43% * * * Q Q * Q 

311 Food manufacturing 28% 53% 19% 13% 45% 26% 41% 1% * Q 

331111 Iron and steel 12% 78% 10% * 11% 62% Q 13% 4% 9% 

3315 Metal casting 20% 68% 12% 13% 13% * 73% * * * 

324110 Petroleum refining 18% 64% 18% 8% 19% 5% 58% * * 27% 

322 Pulp and paper (within 

forest products) 

32% 58% 10% 16% 45% 35% 9% 5% * 4% 

336 Transportation equipment 18% 64% 18% 11% 33% 17% 42% 11% * * 

321 Wood products (within 

forest products) 

20% 68% 13% 9% 27% 9% 36% * * 27% 

z For a detailed description of MECS approach and assumptions related to defining fuel-switching capability, see 

http://www.eia.doe.gov/emeu/mecs/mecs2002/methodology_02/meth_02.html#cfsc. 

aa In Tables 4 through 7 that report MECS data, we have used the “missing data” symbols used in MECS data tables. MECS 

defines these symbols as follows: *=estimate less than 0.5; W=Withheld to avoid disclosing data for individual 

establishments; and Q=Withheld because Relative Standard Error (RSE) is greater than 50 percent. 

bb “Electric receipts” includes quantities of purchased electric power and has not been adjusted to account for any quantities 

that might have been resold or transferred out. It does not include electricity generated onsite. 

“Other” includes all other types of fuel that respondents indicated could have been consumed and not otherwise listed. 

U.S. Environmental Protection Agency 2-13 March 2007 

cc 
Current Energy Consumption 

Table 8: Sector fuel-switching potential in 2002: coal to alternate fuels23 

Coal Switching Potential 

Alternate Fuels That Could Be Substituted for Coal 

(shown as percentage of switchable fraction) 

NAICS Sector 

Switchable 

Fraction 

NonSwitchable 

Fraction 

NonReported 

Fraction 

Electric 

Receipts dd Natural 

Gas 

Distillate 

Fuel Oil 

Residual 

Fuel Oil LPG Other 

All Industrial Codes with Figures 30% 58% 12% 3% 80% 18% 17% 4% 6% 

3313 Alumina and aluminum 0% 0% 100% 0% 0% 0% 0% 0% 0% 

327310 Cement 51% 45% 3% W 91% W W 4% 8% 

325 Chemical manufacturing 36% 62% 2% 1% 82% 14% 11% 0% W 

332 Fabricated metal products 0% 100% 0% 0% 0% 0% 0% 0% 0% 

311 Food manufacturing 20% 80% 0% 0% 83% Q 13% 19% 0% 

331111 Iron and steel 3% 97% 0% 0% 40% 0% 0% 0% 60% 

3315 Metal casting 0% 100% 0% 0% 0% 0% 0% 0% 0% 

324110 Petroleum refining W W W 0% W W 0% 0% 0% 

322 

Pulp and paper (within forest 

products) 

23% 37% 40% 10% 57% 28% 38% W 10% 

336 Transportation equipment W W W 4% 94% 14% 0% 1% 1% 

321 

Wood products (within forest 

products) 

W W W 0% W 0% 0% W 0% 

In terms of sectors switching from natural gas to alternate fuel inputs, Table 7 illustrates the 

following points: 

• In all cases, the non-switchable fraction is larger than the switchable fraction, indicating 

the importance of the aforementioned constraints to fuel-switching (technical, regulatory, 

and supply constraints). 

• In general, there is greater potential for sectors to replace natural gas inputs with 

petroleum fuel inputs (distillate and residual fuel oil, as well as LPG), and relatively less 

potential to replace natural gas with purchased electricity or coal. 

• For sectors with the largest natural gas consumption (chemical manufacturing, food 

manufacturing, petroleum refining, and pulp and paper, as shown in Table 5), there is a 

wide range in ability to switch from natural gas to other fuels. The chemicals sector, which 

has the highest natural gas consumption, has a particularly low switchable fraction. 

In terms of switching from coal to alternate fuel inputs, Table 8 illustrates the following points: 

• In all cases except cement, the non-switchable fraction is larger than the switchable fraction. 

• Natural gas has the greatest potential as a substitute for coal, which would lead to a 

decrease in energy-related emissions. However, factors such as the substantially higher 

cost of natural gas and constraints imposed by natural gas supply infrastructure limit the 

viability of this opportunity for energy-related environmental improvement. 

dd “Electric receipts” includes quantities of purchased electric power and has not been adjusted to account for any quantities 

that might have been resold or transferred out. 

U.S. Environmental Protection Agency 2-14 March 2007 
Current Energy Consumption 

• For the four sectors with the largest coal consumption (cement, chemical manufacturing, 

iron and steel, and pulp and paper, as shown in Table 5), there is again a wide range in 

the potential for switching to alternate fuel sources. In particular, iron and steel has limited 

ability to switch away from coal consumption, which is why the industry is interested in the 

development of technologies that reduce the emissions-intensity of coal consumption.24 

2.2.4 Energy Intensity 

As mentioned previously, energy intensity is the ratio of energy consumed as fuel (i.e., not 

including energy feedstocks) to economic production. Energy-intensive industries may be more 

receptive to efforts to increase energy efficiency due to the economic impacts associated with 

rising fuel input costs. Energy intensity can be measured in terms of energy consumption per 

volume of production (physical energy intensity) or in terms of energy consumption per dollar 

value of output (economic energy intensity). In this report, we primarily use metrics of economic 

energy intensity, supplementing with physical energy intensity metrics where data are available. 

It is important to note that economic energy intensity is affected both by energy consumption 

and the value of the product, which contributes to the magnitude of difference in energy intensity 

between many basic manufacturing industries versus finished product manufacturing industries. 

For example, a ton of steel or cement has a much lower economic value than a ton of integrated 

circuits or finished consumer goods. Because steel or cement production have both a lower 

economic value and a higher energy input, the energy intensity of these basic manufacturing 

industries is higher than many industries producing finished goods. 

MECS presents several ratios of manufacturing energy consumption to economic production; the 

most useful are energy consumption per dollar of value added and energy consumption per dollar 

value of shipments.ee “Dollar of value added” represents the net economic output, or gross 

economic output less the value of purchased inputs. This measure of manufacturing activity is 

derived by subtracting the cost of materials, supplies, containers, fuel, purchased electricity, and 

contract work from the value of shipments (products manufactured plus receipts for services 

rendered). “Dollar value of shipments” represents the gross economic value of product shipments, 

including the cost of inputs, and thus does not provide as refined a measurement of an industry’s 

reliance on energy inputs for economic productivity. Value added is considered to be the best 

metric for comparing the relative economic importance of manufacturing among industries and 

geographic areas. However, as the key energy projections referenced in this report—EIA’s Annual 

Energy Outlook, the Clean Energy Future report, and the American Gas Foundation’s Natural Gas 

Outlook to 2020—all employ gross value of shipments as an economic metric, we primarily use 

value of shipments for the purposes of this analysis. 

For each sector, Table 9 presents 2002 MECS data on energy consumption per economic 

output. As a benchmark, the energy consumption per economic output ratios are aggregated for 

all industrial sectors addressed in the MECS survey (listed as “All Industrial Codes with 

Figures”).ff MECS calculates energy intensity based on energy consumed as a fuel, and the 

ratios do not include fuels consumed as feedstocks. 

As MECS does not contain data for four of the sectors considered in this analysis (metal 

finishing, motor vehicle manufacturing, motor vehicle parts manufacturing, and shipbuilding and 

ee In the 2002 MECS, EIA uses economic data from the U.S. Census Bureau’s 2002 Economic Census, Manufacturing - 

Industry Series. 

ff EIA favors use of a MECS-weighted value of shipments in calculating ratios used in this table in order to minimize any 

sample peculiarities that may impact both consumption and value of shipments. This may result in deviations from 

intensities calculated using unweighted MECS energy consumption data. 

U.S. Environmental Protection Agency 2-15 March 2007 
Current Energy Consumption 

ship repair), for all sectors we have included 2002 Census Bureau data from the Annual Survey 

of Manufacturers on costs of purchased energy per dollar of value added and per dollar of value 

of shipments as an approximation of energy intensity. For these metrics, the benchmark is the 

average for all manufacturing industries (NAICS 31-33). 

Table 9: Sector energy intensity in 200225 26 

NAICS Sector 

Energy 

Consumption per 

Dollar of Value 

Added (KBtu) 

Energy 

Consumption per 

Dollar Value of 

Shipments (KBtu) 

Energy Cost per 

Dollar of Value 

Added (share) 

Energy Cost per 

Dollar Value of 

Shipments (share) 

All Industrial Codes with Figures (benchmark) 8.9 4.2 3.7% 1.8% 

Higher than benchmark 

324110 Petroleum refining 116.3 16.1 21.0% 3.1% 

327310 Cement 95.5 56.0 24.5% 15.1% 

331111 Iron and steelgg 66.5 27.8 20.4% 8.0% 

3313 Alumina and aluminum 34.3 12.2 21.0% 6.9% 

322 Pulp and paper (within forest products) 31.1 15.2 8.8% 4.3% 

325 Chemical manufacturing 15.3 8.5 5.4% 3.0% 

321 Wood products (within forest products) 10.6 4.2 4.7% 1.9% 

3315 Metal casting 10.3 5.6 8.0% 4.6% 

332813 Metal finishinghh NA NA 6.7% 4.0% 

Lower than benchmark 

311 Food manufacturing 6.0 2.6 3.3% 1.5% 

332 Fabricated metal products 3.0 1.7 2.7% 1.5% 

3363 Motor vehicle parts manufacturing NA NA 2.1% 0.9% 

336611 Shipbuilding and ship repair NA NA 1.2% 0.8% 

33611 Motor vehicle manufacturingii NA NA 1.1% 0.3% 

It is important to note that the MECS energy intensity data are based on delivered energy 

consumption rather than primary energy consumption. Thus, it does not account for energy 

losses in the generation, transmission, and distribution of electric power (for additional detail, 

see the Energy Losses in Purchased Electricity sidebar in Section 2.2.5). This means that for a 

given energy requirement and a given dollar value of output, a sector that derives its process 

energy from direct combustion of natural gas onsite could have the same delivered energy 

intensity as one that receives process energy from purchased power. In reality, however, the 

electric power-dependent sector is more energy intensive from a system-wide perspective 

because of the losses associated with electric power generation, transmission, and distribution. 

To some degree the two energy cost columns in Table 9 (energy cost per dollar of value added 

and energy cost per dollar value of shipments) provide a closer approximation of primary energy 

intensity, since electric power is more costly on a Btu basis than energy produced from direct 

fuel inputs onsite. 

gg Census Bureau data are for the larger NAICS category, iron and steel and ferroalloy manufacturing (NAICS 33111). 

hh Census Bureau data are for the larger NAICS category, coating, engraving, heat treating, and allied activities (NAICS 

33281). 

Census Bureau data refer to NAICS 33611 as “automobile and light duty motor vehicle manufacturing.” 

U.S. Environmental Protection Agency 2-16 March 2007 

ii 
Current Energy Consumption 

Of the five sectors with the greatest annual energy requirements—chemical manufacturing, 

petroleum refining, pulp and paper, iron and steel, and food manufacturing—all but food 

manufacturing are more energy-intensive than the industrial manufacturing benchmark. 

However, comparing sector energy consumption with energy intensity highlights some important 

distinctions: 

• Though the chemicals sector has the greatest energy consumption, it not the most energy 

intensive. 

• The aluminum industry is highly energy intensive but uses far less energy than the five 

sectors with the highest energy consumption, in part due to the comparatively smaller size 

of the aluminum industry. 

• The food manufacturing industry ranks fifth in terms of total energy usage (see Table 4), 

but it has a lower energy intensity than the industry benchmark. 

These results indicate the importance of using multiple metrics to characterize sector energy 

usage. The energy intensity ratios shown in Table 9 are also important because they indicate an 

industry’s expected sensitivity to fluctuations in fuel prices. 

• Increasing energy costs are likely to have the greatest impact on industries with higher 

energy costs per dollar of value added and per dollar value of shipments than the 

manufacturing industry benchmark—particularly petroleum refining, cement, aluminum, 

and iron and steel. 

• Despite the fact that the aggregated energy requirements of the food manufacturing 

industry are large, energy costs represent a relatively small fraction of economic output 

(lower than the manufacturing industry benchmark), which likely accounts for the fact that 

this sector has not historically engaged in energy efficiency efforts to the same degree as 

highly energy-intensive manufacturing industries. 

When we discuss the economic context for energy usage in Section 2.4, the energy cost and 

energy intensity ratios are the metrics we use to rank the sectors in terms of sensitivity to 

energy costs (see Table 17). 

U.S. Environmental Protection Agency 2-17 March 2007 
Current Energy Consumption 

2.2.5 The Manufacturing Energy System 

For manufacturing industries, including the 12 sectors considered in this analysis, the major 

stages of energy use include the following:27 

• Energy generation: 

– Fossil fuels are the largest energy inputs in manufacturing and may be used in central 

plants to generate electricity, steam, or CHP, or used directly to power manufacturing 

process systems.jj

Energy Losses in Purchased Electricity 

– Purchased electric power is another important Electric power generation is associated with

energy input that is generated offsite by substantial energy losses, particularly for fossil 

electric utilities and transmitted to the facility. fuel-fired power plants. The magnitude of such 

losses varies greatly according to factors such – Energy may also be supplied by renewable as fuel inputs and age of equipment. Electric energy sources onsite. Though the renewable power transmission and distribution are fraction is small for most sectors, in the forest associated with smaller energy losses. 

products industry more than half of the Aggregated across the national grid, the energy sector’s energy requirements are provided loss fraction is 67.5 percent of total electric 

through onsite power generation using energy, meaning that delivered electricity 

renewable biomass fuels. consumption represents just over 30 percent of 

total energy inputs for electric power generation. – Though a less commonly utilized energy 

source than purchased fuels or electricity, 

some industrial plants also purchase steam and/or chilled water. 

• Energy transmission/distribution: Within the facility, energy transmission/distribution 

systems include piping for steam, hot water, chilled water, cooling water, compressed air, 

steam condensate return, and chilled water return piping, fuel piping, and wires for electric 

power transmission. 

• Energy end uses: 

– Facility-related energy requirements include lighting, heating, ventilating, and air 

conditioning (HVAC), and office equipment, and typically comprise a relatively small 

fraction of manufacturing energy use. 

– Equipment energy use includes direct energy inputs for process heating, cooling, and 

electrochemical transformation, as well as indirect energy inputs for machine drives 

that operate pumps, compressors, fans, blowers, conveyors, and mixers. Common 

processes used in industrial manufacturing applications include separation, melting, 

drying, mixing, grinding, forming, and waste handling. 

Each stage of the manufacturing energy system—energy generation, transmission/distribution, 

and use—is associated with energy losses. Substantial offsite energy losses are associated 

with electric generation (see previous sidebar, Energy Losses in Purchased Electricity), and 

these losses are represented by the difference between primary and delivered energy 

consumption. In the manufacturing energy system, several categories of losses represent 

general areas of opportunity for increased energy efficiency:28 

jj Fossil fuels are also used as manufacturing feedstocks (raw materials) by some sectors, but feedstock fuel use is not 

included in DOE’s manufacturing energy footprint diagrams that are discussed in this section. 

U.S. Environmental Protection Agency 2-18 March 2007 
Current Energy Consumption 

• Energy generation losses: 

– External generation losses are most significant for electric power generation, 

transmission, and distribution, but for any given manufacturing facility the external loss 

fraction will vary according to the efficiency of local sources of electric power 

generation. (As an average for the entire national grid, DOE assumes the efficiency of 

utility power generation and transmission is 32.5 percent, meaning that associated 

energy losses are assumed to be 67.5 percent).

29 A small amount of loss also occurs 

with fuel transport (approximately 3 percent of total fuel energy). Facilities can reduce 

offsite energy losses through more efficient use of purchased electricity, and to some 

degree by replacing purchased electricity with onsite electricity generation, which is 

also associated with energy losses. 

– Onsite generation losses occur in central energy generation applications such as 

steam plants, power plants, and CHP plants. Losses from boilers vary widely due to 

equipment age, fuel type, and maintenance, and range from 10 to 45 percent.30 More 

efficient generating processes such as CHP are associated with lower internal 

generation losses. 

• Onsite energy transmission/distribution losses: Within the facility, energy is lost in fuel 

and electricity distribution lines, as well as steam pipes, traps, and valves. The magnitude 

of such losses ranges from 3 to 40 percent, but the largest losses are typically in steam 

pipes (20 percent) with smaller losses associated with fuel transmission lines and electric 

wires (3 percent).31 

• Equipment energy losses: Energy is also lost due to inefficiencies in the wide range of 

equipment used for preprocess and manufacturing process activities: motors, mechanical 

drives, process heaters and coolers, etc. Again, there is a wide range in how much energy 

is typically lost from such equipment. Compressors typically lose as much as 80 percent 

of energy inputs, pumps and fans typically lose 35 to 45 percent, and motors lose 5 to 10 

percent.32 

DOE’s Industrial Technologies Program (ITP) has compiled a set of energy use and loss 

footprints for many of the sectors considered in this analysis, as well as an aggregated footprint 

for U.S. manufacturing industries (energy consumption data used in this analysis were from the 

1998 MECS).33 In Table 10, we examine three energy loss categories as a fraction of each 

industry’s primary energy requirements: (1) external losses (losses in energy generation, 

transmission, and distribution) associated with purchased electricity and fossil fuel inputs; (2) 

onsite generation, transmission, and distribution losses (generation losses from thermal and 

electric generating equipment, as well as losses from pipes, valves, steam traps, and electric 

and fuel transmission lines occurring within the facility); and (3) equipment losses (losses from 

preprocess energy conversion equipment such as heat exchangers, condensers, heat pumps, 

machine drives, pumps, and motors). We also examine two energy end use categories as a 

fraction of each industry’s primary energy requirements: (1) process energy consumption 

(energy used in the manufacturing process) and (2) facilities energy use (energy used for 

lighting, HVAC, etc.). 

U.S. Environmental Protection Agency 2-19 March 2007 
Current Energy Consumption 

Table 10: Sector energy use and loss footprint in 199834 

NAICS Sector 

External 

Generation/ 

Transmission 

Losses 

Onsite 

Generation/ 

Transmission 

Losses 

Energy 

Conversion 

Equipment 

Losseskk 

Process Energy 

Consumption 

Facilities 

Energy Use 

3313 Alumina and aluminum 54% 3% 13% 28% 1% 

327310 Cement 20% 3% 14% 63% 0.5% 

325 Chemical manufacturing 27% 14% 13% 44% 2% 

332 Fabricated metal productsll 46% 3% 11% 28% 12% 

311, 312 Food & beverage manufacturing 31% 14% 10% 39% 5% 

321, 322 Forest productsmm 19% 25% 12% 42% 2% 

33111 Iron, steel, and ferroalloynn 19% 4% 14% 60% 3% 

3315 Metal castingoo 37% 3% 9% 41% 10% 

324110 Petroleum refining 9% 12% 13% 64% 1% 

336 Transportation equipmentpp 46% 6% 10% 22% 16% 

The energy use and loss footprints illustrate important differences in the way these sectors use 

energy: 

• Due to the magnitude of energy losses associated with electricity generation, 

transmission, and distribution, electricity-dependent sectors such as aluminum, fabricated 

metal products (the larger NAICS category that includes metal finishing), and 

transportation equipment have high external generation/transmission losses. 

• The magnitude of onsite generation and transmission losses in the chemical 

manufacturing, food manufacturing, forest products, and petroleum refining industries is 

attributable to the fact that these sectors meet a larger fraction of their energy needs with 

onsite generation. Given the magnitude of associate energy losses, boilers and other 

onsite energy generating equipment represent a key area for energy efficiency 

improvement. 

• The relatively small process energy fraction for less energy-intensive sectors like 

fabricated metal products and transportation equipment suggests that energy efficiency 

opportunities are likely to lie in a number of areas, in addition to process-related 

improvements. 

kk DOE addresses energy use and losses by energy conversion equipment (preprocess) and process equipment separately 

but does not attempt to quantify process energy losses, primarily because energy conversion equipment and process 

equipment are frequently integrated, making it difficult to distinguish preprocess from process energy losses. 

ll Metal finishing (NAICS 332183) is included in the larger NAICS category, fabricated metal products (NAICS 332). 

mm Forest products includes the wood products (NAICS 321) and pulp and paper (NAICS 322) sectors. 

nn Iron and steel mills (NAICS 331111) is included in the larger category for iron, steel, and ferroalloy manufacturing (NAICS 

33111). 

oo DOE refers to NAICS 3315 as “foundries.” 

pp Motor vehicle assembly (NAICS 33611), motor vehicle parts manufacturing (NAICS 3363), and shipbuilding and ship repair 

(NAICS 336611) are included in the larger NAICS category, transportation equipment (NAICS 336). 

U.S. Environmental Protection Agency 2-20 March 2007 
Current Energy Consumption 

2.2.6 Energy Efficiency and Clean Energy Opportunities 

In the sector summaries contained in Chapter 3, we focus on five primary opportunities for 

reducing the environmental impact of energy use—primarily air emissions of GHGs and CAPs. 

These opportunities promote environmentally preferable energy outcomes by reducing energyrelated air emissions through increased energy efficiency (which reduces fuel consumption and 

associated emissions) and/or transitioning to less emissions-intensive energy sources. 

• Cleaner fuels. These opportunities involve replacing fuel inputs with alternate fuel inputs 

that produce lower GHG and/or CAP emissions for the same amount of energy in terms of 

Btus (e.g., natural gas in place of coal). This category also includes onsite renewable 

electricity generation using biomass, wind, solar, or geothermal power. Two clarifying 

points need to be made. First, in general there is no perfect hierarchy of what constitutes 

a “cleaner” fuel across all applications, as emissions will vary according to plant-specific 

factors such as equipment age and pollution control mechanisms. Second, also note that 

“alternate fuels,” such as waste fuels used in cement kilns, may or may not be cleaner 

than what they are replacing depending on unit-specific characteristics. 

• Increased CHP. Combined heat and power applications increase energy efficiency by 

producing heat (typically steam) and power (electricity) from a single fuel source—a form 

of cogeneration. Some CHP systems are engineered to provide electricity, hot water, and 

chilled water as well, depending on the needs of the particular industry. Common fuel 

inputs for CHP include coal, natural gas, biomass, and fuel oil. CHP is a form of 

distributed generation, as electricity is generated at the facility level rather than by an 

electric utility, and thus is associated with lower levels of transmission and distribution 

losses than purchased electricity. Conventional generation of electric power also wastes 

much of the heat generated in electricity production (which CHP uses), and conventional 

thermal energy generation often misses an easy opportunity to generate electric power. 

As a result, CHP systems have efficiencies exceeding 70 percent. CHP systems 

achieving efficiencies exceeding 80 percent are frequent, and some highly integrated 

systems have been shown to reach levels in excess of 90 percent. CHP represents a 

substantial efficiency improvement compared with a state-of-the-art central plant that 

offers maximum system fuel efficiency for delivered power in the range of 55 to 60 

percent.35 

• Equipment retrofit/replacement. Energy efficiency can be increased by retrofitting or 

replacing existing equipment used for onsite heat or power generation and distribution, 

manufacturing processes, or to meet facility requirements such as lighting or HVAC. Many 

of the sectors considered in this report have substantial onsite capacity for generating 

electric and thermal energy, and upgrades to such equipment can reduce energy losses. 

Given the magnitude of industrial process energy requirements, retrofitting or replacing 

existing process equipment offers the potential for substantial increases in energy 

efficiency, and thus a reduction in energy-related emissions per unit of manufacturing 

output. Equipment is most likely to be replaced at the end of its full service life, because 

new highly capital-intensive equipment purchases usually cannot be justified on the basis 

of energy savings alone. Also, equipment replacement often entails substantial time 

requirements for design, engineering, building, installing, and commissioning. Installing 

new process equipment typically involves building a new process line rather than shutting 

down operating equipment, and this constraint requires that the facility have sufficient 

space available to support the new line. As full equipment replacement often faces these 

types of hurdles, retrofitting may be a more viable opportunity in many cases. Retrofitting 

U.S. Environmental Protection Agency 2-21 March 2007 
Current Energy Consumption 

or replacing facility equipment such as lighting and HVAC system components may also 

be easier to achieve from an operational and capital standpoint. 

• Process improvement. This term encompasses a broad range of opportunities for 

increasing energy efficiency and reducing energy-related emissions, some of which are 

major capital-intensive changes and some of which are relatively minor low-cost 

improvements. Capital-intensive opportunities entail wholesale process changes such as 

the transition from wet to dry kilns in cement manufacturing, or from the blast furnace and 

coke plant to direct iron ore reduction in steelmaking. (Note that in cases where process 

changes require installation of new equipment, such opportunities could also be classified 

as “equipment replacement,” but we have made an effort to differentiate these wholesale 

process-related changes from other types of equipment upgrades). Less capital-intensive 

opportunities are primarily geared towards implementing energy management best 

practices or adjusting existing processes to improve energy efficiency and/or achieve 

other environmental benefits such as waste minimization. Examples include reducing 

waste treatment energy requirements through increased recycling of process materials 

and scheduling production activities to reduce equipment idling time. 

• Research and development (R&D). As noted earlier, a number of sectors participate in 

DOE’s ITP and/or other R&D efforts in order to develop and commercialize higherefficiency technologies and processes. These projects represent typically longer-term 

energy efficiency opportunities. 

In some cases, exploiting one or more of these opportunities may produce an environmental 

quality improvement in some respects, and an environmental quality reduction in other areas. 

For example, reducing inputs of purchased electricity in favor of natural gas may reduce energyrelated emissions at the electric generation level and improve the overall efficiency of energy 

use (because direct natural gas inputs at the facility level are associated with lower energy 

losses than purchased electricity), but may lead to an increase in energy-related emissions at 

the facility level. In the Environmental Implications section of each sector summary (see Chapter 

3), we seek to identify such tradeoffs to the extent possible. 

2.2.7 Transportation Energy Consumption 

This analysis focuses on energy use and energy efficiency opportunities at manufacturing 

facilities and does not address in detail transportation energy requirements, which are 

substantial for many sectors with respect to freight shipping. Though it was not possible to 

obtain annual data on product shipments for all sectors, Table 11 summarizes commodity 

shipping data for some of the sectors covered in this analysis. The commodities shown in the 

table represent more than half of all U.S. commodity shipments in 2002. The food 

manufacturing sector is particularly intensive in terms of transportation energy requirements. 

U.S. Environmental Protection Agency 2-22 March 2007 
Current Energy Consumption 

Table 11: Commodity shipments by sector in 200236 

Commodity 

Ton miles 

(millions)qq % of Total 

All commodities 3,137,898 100.0% 

Food 678,263 21.6% 

Petroleum and coal products 265,684 8.5% 

Chemicals 268,560 8.6% 

Wood products 127,941 4.1% 

Paper 118,557 3.8% 

Iron and steel 93,934 3.0% 

Fabricated metal productsrr 42,680 1.4% 

Transportation equipment 69,678 2.2% 

Remaining commodity shipments 1,472,601 46.9% 

qq A ton mile is a unit of freight transportation that is derived by multiplying the distance the freight is hauled in miles by the 

weight of the shipment in tons. (See DOE’s Energy Efficiency Glossary at 

http://www.eia.doe.gov/emeu/efficiency/ee_gloss.htm.) 

rr Metal finishing (NAICS 332183) is included in the larger NAICS category, fabricated metal products (NAICS 332). 

U.S. Environmental Protection Agency 2-23 March 2007 
Current Energy Consumption 

2.3 Environmental Context 

Insights 

National Emissions Inventory (NEI) data on energy-related emissions of criteria air pollutants by 

the sectors considered in this analysis show that sulfur dioxide and nitrogen oxides comprise the 

largest fraction of energy-related emissions.ss Though not represented in NEI emissions data, 

energy use also contributes to emissions of the GHG carbon dioxide (CO2), which is an important 

contributor to global climate change. Key opportunities for reducing energy-related emissions lie 

with energy efficiency upgrades to external combustion boilers and process equipment. 

2.3.1 Sources and Impacts of Energy-Related Air Emissions 

Our assessment of the environmental effects of sector energy use focuses on air emissions. 

Energy-related air emissions sources include the following: 

• Stationary source emissions, for the purposes of this analysis, include those that occur at 

the manufacturing facility from fuels consumed onsite to generate electric or thermal 

energy, as well as fuels required to power manufacturing process equipment, and offsite 

emissions from electric power generation that meets the purchased electricity fraction of 

manufacturing energy requirements. 

• Mobile source emissions are primarily associated with freight shipping. We do not seek to 

quantify sector-related mobile source emissions for the purposes of this analysis. 

Table 12 summarizes the health and environmental impacts associated with the primary energyrelated air pollutants considered in this analysis. 

Table 12: Health and environmental impacts of energy-related air pollutants37 

Pollutant Health Impact Environmental Impact 

Carbon dioxide (CO2) None Greenhouse gas that contributes to global 

warming 

Carbon monoxide (CO) Reduces blood’s capacity for carrying oxygen to 

body cells and tissues; is particularly damaging 

for people with impaired cardiovascular and lung 

function 

A greenhouse gas precursor that contributes to 

the formation of methane and carbon dioxide in 

the atmosphere38 

Nitrogen oxides (NOx) Causes lung damage and respiratory illness Contributes to acid rain that degrades soil and 

water quality; forms acid aerosols that reduce 

visibility; contributes to fine particulates and 

ozone 

Particulate matter (PM) Causes respiratory system irritation and illness; 

causes lung damage 

Forms haze that reduces visibility 

Sulfur dioxide (SO2) Causes respiratory illness and may lead to lung 

damage 

Contributes to acid rain that degrades soil and 

water quality; forms acid aerosols that reduce 

visibility; contributes to fine particulates 

Volatile organic compounds 

(VOCs) 

Causes respiratory illnesses including asthma; 

irritates eyes and respiratory system; some VOCs 

may cause cancer 

Reacts with nitrogen oxides to form ozone; some 

VOCs damage vegetation 

Ozone (ground-level)

tt Causes respiratory illnesses including asthma; 

irritates eyes and respiratory system 

Forms smog that reduces visibility; damages 

vegetation 

ss NEI data also show substantial energy-related carbon monoxide (CO) emissions, but as CO does not typically represent a 

large component of combustion-related emissions from stationary sources, NEI data may overstate such emissions and thus 

we devote minimal discussion to emissions of CO. 

tt This analysis is not able to quantify ground-level ozone resulting from sector energy consumption, though VOC and NOx 

emissions that contribute to ozone formation are reported in Section 2.3.2 and at the sector level in Chapter 3. 

U.S. Environmental Protection Agency 2-24 March 2007 
Current Energy Consumption 

In manufacturing industries, the majority of energy-related emissions of CAPs are attributable to 

combustion processes. Sulfur dioxide emissions mostly result from combustion of sulfurcontaining fuels, primarily coal. Nitrogen oxides are also products of combustion, but emissions 

do not vary as much by fuel type as SO2 emissions. Particulate matter can be ash and dust 

resulting from the combustion of coal or heavy oil, or very fine particulates (PM2.5), which are 

largely composed of aerosols formed by nitrogen oxide and sulfur dioxide emissions. Carbon 

monoxide is a product of incomplete combustion, but the largest source is vehicles, with 

stationary sources typically contributing a smaller part of the inventory. Volatile organic 

compounds (VOCs) can also result from incomplete combustion, but the largest energy-related 

components are fugitive emissions from fuel storage tanks and pipelines, and combustionrelated vehicle emissions. The largest components of energy-related CAP emissions from the 

industrial sector are SO2, NOx, and larger particulates from combustion of coal. Excepting 

emissions from off-road vehicles, VOCs and CO emissions from combustion are a much smaller 

fraction of total energy-related emissions. 

More than half of the U.S. population lives in counties that are in non-attainment for ozone 

and/or particulate matter National Ambient Air Quality Standards (NAAQS).39 Energy-related 

emissions of NOx and VOCs contribute to ground-level ozone formation, and SO2 emissions 

contribute to PM formation. Thus, reducing energy-related CAP emissions by industrial sources 

is an important component of ongoing efforts to achieve NAAQS. 

Another critical environmental impact of energy use is emissions of the GHG carbon dioxide, 

which also results from fuel combustion processes and is an important contributor to global 

climate change. (Other GHGs, such as methane, also contribute to global climate change, but 

as energy-related sources of these GHGs are not substantial, we focus primarily on CO2 

emissions in this analysis.) Such emissions do not impact regional air quality, but CO2 is 

persistent in the upper atmosphere, trapping infrared radiation from the earth’s surface and 

contributing to increases in the earth’s temperature. 

Though this analysis focuses primarily on CAP and GHG emissions, energy consumption also 

contributes to emissions of other hazardous air pollutants (HAPs), including mercury. In 

addition, this analysis does not attempt to quantify energy-related impacts on soil and water 

quality. 

2.3.2 Approach Used to Assess Energy-Related Air Emissions 

In our assessment of environmental impacts resulting from sector energy consumption, this 

analysis focuses on CAP emissions, as well as two pollutants that contribute to the formation of 

CAPs: VOCs and ammonia (NH3). (Ammonia is a very minor component of energy-related 

emissions, but is included in this analysis as it is one of the pollutants represented in the NEI 

data set.) We collectively refer to emissions of these pollutants as CAPs. In addition to the 

overview of energy-related CAP emissions across all sectors contained in Section 2.3.3, the 

sector summaries in Chapter 3 present a more detailed description of energy-related CAP 

emissions for each sector, using data from NEI. 

EPA’s NEI is a national database of CAP and HAP emissions based on data from numerous 

state, tribal, and local air pollution control agencies; industry-submitted data; data from other 

EPA databases; as well as emissions estimates. State and local emissions inventories are 

submitted to EPA once every three years for most point sources contained in NEI. This analysis 

uses the Draft 2002 NEI data, as the Final 2002 data are not currently available at the level of 

detail required for this analysis. 

U.S. Environmental Protection Agency 2-25 March 2007 
Current Energy Consumption 

In the NEI database, point source emissions are associated with industry classification codes 

(NAICS or Standard Industrial Classification (SIC) codes) as are the 12 sectors addressed in 

this analysis. It is important to note that emissions stemming from the generation of purchased 

energy (primarily electricity, but also other non-fuel sources of energy such as steam that may 

be purchased by industrial manufacturing sectors) are attributed to the generating source, not 

the purchasing entity. Therefore, emissions for any given sector will not include emissions from 

purchased energy. Recognizing this omission will be particularly important for electricitydependent sectors, as noted in the sector summaries in Chapter 3. 

• CAP emissions in NEI are associated with several levels of source classification codes 

(SCC) that indicate the detailed source of each CAP emission data point. SCCs are 

associated with emissions from all source categories (point, area, and mobile). For the 

purposes of this analysis, more than 1,000 SCCs were identified as being “energy-related” 

from the list of 9,865 SCCs. Energy-related CAP emissions include emissions from 

combustion processes, such as those SCCs listed in the following general source 

categories: 

– External combustion boilers 

– Internal combustion engines 

– Stationary source fuel combustion 

• Energy-related CAP emissions also include emissions from the use of fuels for energy in 

industrial processes (such as process heaters) and emissions from the storage of fuels. 

• All other CAP emissions include process-related CAP emissions not related to fuel 

combustion, emissions where it was unclear from the SCC whether they are energyrelated (such as SCC descriptions “Not Specified,” “Not Defined,” “Not Classified,” 

“Miscellaneous,” “General,” or “All Processes”), and sector emissions that are not 

associated with an SCC. 

• In Chapter 3, the figures showing NEI data on energy-related CAP emissions include the 

following: 

– Energy-related CAP emissions: Compares energy-related CAP emissions with all other 

CAP emissions. 

– Emissions by criteria air pollutant: Shows the fraction of total energy-related CAP 

emissions represented by each CAP. 

– Emissions by source category: Shows energy-related CAP emissions by the most 

general available source category (e.g., external combustion boilers, internal 

combustion engines, and industrial processes). 

– Emissions by fuel type: Shows energy-related CAP emissions that source from the use 

of a fuel (e.g., distillate oil or natural gas). It also aggregates emissions of combustion 

byproducts (e.g., exothermic) or handling fuels (e.g., coal handling and storage) as 

“Unknown.” 

As NEI data do not capture CO2 emissions, we include CO2 emissions estimates and 

projections from EIA’s 2006 Annual Energy Outlook and the Clean Energy Future report, which 

address eight of the sectors included in this analysis. We address projected CO2 emissions 

under our “base case” and “best case” energy scenarios in Chapter 3. 

U.S. Environmental Protection Agency 2-26 March 2007 
Current Energy Consumption 

2.3.3 Stationary Source Emissions 

Table 13 presents NEI data on annual energy-related CAP emissions by sector (units are tons 

per year (TPY)). 

Table 13: Energy-related CAP emissions by sector in 200240 

NAICS Sector 

CO 

(TPY)

uu NOx 

(TPY) 

PM10 

(TPY) 

SO2 

(TPY) 

NH3 

(TPY) 

VOC 

(TPY) 

All 

EnergyRelated 

CAP 

(TPY) 

All CAP 

Emissions 

(TPY) 

3313 Alumina and aluminum 6,776 13,036 474 51,176 40 1,234 72,736 538,841 

327310 Cement 15,674 11,636 668 12,943 3 553 41,477 544,501 

325 Chemical manufacturing 213,176 220,183 10,510 279,403 4,474 11,377 739,123 1,536,183 

311 Food manufacturing 70,848 73,073 7,218 90,203 860 5,522 247,724 395,289 

331111 Iron and steel 125,574 45,779 6,858 43,589 1,543 4,465 227,808 850,644 

332813 Metal finishing 11 28 1 70 0 1 111 374 

3315 Metal casting 1,790 2,295 150 759 24 207 5,225 72,645 

33611 Motor vehicle manufacturing 2,456 3,720 167 2,235 27 196 8,801 48,761 

3363 Motor vehicle parts manufacturing 201 492 26 9 8 131 867 7,778 

324110 Petroleum refining 46,942 117,470 8,738 108,189 1,366 16,133 298,838 788,985 

322 Pulp and paper (within forest 

products) 

195,218 184,514 17,617 303,285 1,215 19,099 720,948 1,173,568 

321 Wood products (within forest 

products) 

101,106 26,369 17,271 3,658 90 34,791 183,285 289,727 

336611 Shipbuilding and ship repair 186 866 90 1,150 6 121 2,419 5,520 

Total 779,958 699,461 69,788 896,669 9,656 93,830 2,549,362 6,252,816 

As noted in Section 2.3.2, the NEI data presented in Table 13 represent energy-related 

emissions that occur at the facility level but do not capture emissions associated with the 

generation and transmission of purchased electricity. For electricity-dependent sectors such as 

aluminum, the magnitude of such emissions is likely to be substantial but also vary depending 

upon the energy inputs used to generate electricity at the utility level (for example, hydroelectric 

generation is considerably less emissions-intensive than coal-powered generation, and many 

aluminum manufacturing facilities are located in the Pacific Northwest, which has extensive 

hydropower resources). 

Data presented in the table above raise the following points regarding energy-related CAP 

emissions: 

• Sulfur dioxide (35 percent) and nitrogen oxides (27 percent) represent the largest fraction 

of energy-related CAP emissions. Increasing energy efficiency or promoting a cleaner fuel 

mix in these sectors is likely to have the greatest impact on emissions of these pollutants. 

(According to NEI data, carbon monoxide, a product of incomplete combustion, also 

represents a substantial fraction (31 percent) of energy-related CAP emissions, but NEI 

data errors may contribute to an overstatement of CO emissions, as they are not typically 

uu As CO does not typically represent a large component of combustion-related emissions from stationary sources, NEI data may 

overstate such emissions and thus we devote minimal discussion to emissions of CO. 

U.S. Environmental Protection Agency 2-27 March 2007 
Current Energy Consumption 

a very large component of combustion-related emissions from stationary sources. 

Therefore, we devote minimal discussion to CO emissions.) 

• Energy-related CAP emissions are a function of total energy consumption, fuel mix, 

process energy requirements, and equipment type. Thus, there are many factors that 

determine whether a sector’s energy-related CAP emissions are higher or lower than any 

other sector. 

• Between sectors there is wide variation in the fraction of total CAP emissions that is 

classified as energy-related—from 8 percent to 63 percent of total CAP emissions. Total 

CAP emissions also range widely due to industry-specific factors inherent to the 

manufacturing process, such as the magnitude of process heating requirements. Thus, it 

is not necessarily meaningful to compare the energy-related CAP fractions across sectors, 

especially since NEI data do not include indirect emissions from offsite electricity 

generation, which is a substantial component of energy use in sectors such as aluminum, 

metal finishing, motor vehicle manufacturing, etc. 

• The fraction of energy-related CAP emissions also depends on unique characteristics of 

sector energy use. For example, in food manufacturing, pulp and paper, and wood 

products, energy-related CAP emissions comprise more than 60 percent of total CAP 

emissions. This result is in large part due to the magnitude of onsite power generation in 

these sectors, which in itself may represent an environmentally preferable energy 

strategy. For example, in the forest products industry (pulp and paper and wood 

products), a large fraction of the sector’s energy requirements are met with onsite 

generation of electric and thermal energy using biomass fuels that are byproducts of the 

manufacturing process. Increased use of such renewable biomass fuels would reduce 

energy losses associated with offsite electricity generation, transmission, and distribution 

(see Section 3.5). 

• Energy efficiency and clean energy improvement in the sectors with the greatest energyrelated CAP emissions (chemical manufacturing, food manufacturing, forest products, iron 

and steel, and petroleum refining) offer the greatest potential for reducing the 

environmental impact of sector energy use. 

Table 14 presents NEI data on the sources of energy-related CAP emissions presented in Table 

13. External combustion boilers have multiple applications in industrial manufacturing facilities, 

including central power generation, steam generation, process heating, and space heating. 

Industrial process emissions include emissions from direct fuel combustion in the manufacturing 

process, such as from fuel-fired equipment. The internal combustion engine category includes 

central power generation applications such as turbines and reciprocating engines. The 

petroleum and solvent evaporation category includes emissions from equipment like heaters 

used in coating operations. The “other” category includes all miscellaneous sources that are 

associated with energy-related CAP emissions, such as emissions from other combustion 

processes (e.g., fires). 

U.S. Environmental Protection Agency 2-28 March 2007 
Current Energy Consumption 

Table 14: Energy-related CAP emissions by source category in 200241 

NAICS Sector 

External 

Combustion 

Boilers 

Industrial 

Processes 

Internal 

Combustion 

Engines 

Petroleum 

and Solvent 

Evaporation Other TOTALvv 

3313 Alumina and aluminum 82% 18% 0% 0% 0% 100% 

327310 Cement 16% 82% 2% 0% 0% 100% 

325 Chemical manufacturing 60% 33% 6% 0% 0.3% 99% 

311 Food manufacturing 94% 3% 3% 0% 0.2% 100% 

331111 Iron and steel 59% 41% 0% 0% 0% 100% 

332813 Metal finishing 90% 8% 2% 0% 0% 100% 

3315 Metal casting 49% 39% 11% 1% 0% 100% 

33611 Motor vehicle manufacturing 74% 8% 9% 0% 8.9% 100% 

3363 Motor vehicle parts manufacturingww 17% 6% 77% 0% 1% 101% 

324110 Petroleum refining 51% 37% 10% 0% 2% 100% 

322 Pulp and paper (within forest products) 95% 4% 1% 0% 0% 100% 

321 Wood products (within forest products) 88% 12% 0% 0% 0.5% 101% 

336611 Shipbuilding and ship repair 71% 1% 27% 0% 1% 100% 

Total 75% 21% 3% 0% 0.4% 100% 

Several points are important to note regarding the data contained in Table 14: 

• It may not be possible to make definitive distinctions between some of these source 

categories, particularly the industrial processes category and the boiler and engine 

categories. NEI data are based on facility reporting, modeling, and estimates, where there 

may be inconsistencies in how sources of energy-related emissions are categorized. For 

example, fuel combustion related to process heating could be categorized as an industrial 

process energy use or defined under the external combustion boiler category. 

• For a given sector, the primary source of energy-related CAP emissions depends primarily 

on industry-specific factors inherent to the manufacturing process. 

• In general, the primary opportunities for reducing energy-related CAP emissions lie with 

external combustion boilers and process equipment, with boilers comprising the largest 

source of emissions in most industries. Process equipment dominates energy-related 

CAP emissions in a few key industries including cement kilns, fluid process heaters in the 

chemical and petroleum refining industries, and fired systems such as furnaces, metal 

melters, and heaters in iron and steel. 

Additional detail on energy-related emissions of carbon and CAPs is provided in the sector 

summaries in Chapter 3. 

vv Rows may not sum to 100% due to independent rounding. 

ww The high fraction of energy-related CAP emissions from internal combustion engines is the result of an NEI data reporting 

error, as noted in Section 3.10. 

U.S. Environmental Protection Agency 2-29 March 2007 
Current Energy Consumption 

2.3.4 Comparison of Energy Consumption Characteristics 

To continue our characterization of sector energy consumption from Section 2.2 and gain insight 

into how energy consumption and energy intensity relate to CAP emissions, Table 15 ranks the 

sectors on the basis of three metrics: total energy-related CAP emissions, total energy 

consumption, and energy intensity. 

Table 15: Comparison of 2002 data on energy-related CAP emissions, 

total energy consumption, and energy intensity by sector42 43 44 

Emissions Energy Consumption Energy Intensity 

NAICS 

Code Sector 

Total EnergyRelated CAP 

Emissions 

(TPY) Rank 

Total Energy 

Consumption 

(TBtu) Rank 

Energy 

Consumption per 

Dollar Value of 

Shipments (KBtu) Rank 

325 Chemical manufacturing 739,123 1 6,465 1 8.5 6 

322 Pulp and paper 720,948 2 2,363 3 15.2 4 

324110 Petroleum refining 298,838 3 6,391 2 16.1 3 

311 Food manufacturing 247,724 4 1,123 5 2.6 9 

331111 Iron and steel 227,808 5 1,308 4 27.8 2 

321 Wood products 183,285 6 377 9 4.2 8 

3313 Alumina and aluminum 72,736 7 473 6 12.2 5 

327310 Cement 41,477 8 409 8 56.0 1 

33611 Motor vehicle manufacturingxx 8,801 9 429 7 0.7 10 

3315 Metal casting 5,225 10 165 10 5.6 7 

336611 Shipbuilding and ship repair 2,419 11 429 7 0.7 10 

3363 Motor vehicle parts manufacturing 867 12 429 7 0.7 10 

332813 Metal finishing 111 13 NA NA NA NA 

The following points are evident from the comparison of sector rankings in terms of energyrelated CAP emissions, total energy consumption, and energy intensity as shown in Table 14: 

• There is a good degree of correlation between energy-related CAP emissions and total 

energy consumption for most sectors, with the important caveat that for sectors with 

substantial purchased electricity requirements (e.g., aluminum, metal casting, metal 

finishing, motor vehicle manufacturing, motor vehicle parts manufacturing, and 

shipbuilding and ship repair), NEI data underestimate energy-related CAP emissions by 

attributing emissions associated with electric power generation to the generating sources 

rather than to the purchasing entity. 

• There is less consistent correlation between energy intensity (energy consumption per 

value of economic output) and energy-related CAP emissions. For most sectors, the 

emissions ranking is either equivalent (within one point) to the energy intensity ranking or 

As MECS does not contain sector-level data for motor vehicle manufacturing (NAICS 33611), motor vehicle parts 

manufacturing (NAICS 3363), or shipbuilding and ship repair (NAICS 336611), energy consumption and energy intensity 

data for these three sectors are for the larger NAICS category, transportation equipment (NAICS 336). 

U.S. Environmental Protection Agency 2-30 March 2007 

xx 
Current Energy Consumption 

at least two points higher. For three sectors—aluminum, cement,yy and iron and steel—the 

energy intensity ranking is two or more points higher than the energy-related emissions 

ranking. In the case of aluminum, this result may be partly attributable to the fact that NEI 

data do not include emissions associated with purchased electricity. Still, the lack of 

correlation between energy intensity and energy-related CAP emissions suggests that in 

terms of reducing the environmental impacts of sector energy use, focusing on the most 

energy-intensive sectors may not produce the environmentally preferable outcome. 

yy For the cement industry, the majority of the sector’s energy requirements and associated emissions result from the thermoreduction of limestone, clay, and sand. Given the high energy requirements of this process, and the fact that NEI data for 

the cement industry only classify 8% of the sector’s total CAP emissions as “energy-related,” it appears likely that NEI data 

misclassify some energy-related CAP emissions as non-energy-related. 

U.S. Environmental Protection Agency 2-31 March 2007 
Current Energy Consumption 

2.4 Economic Context 

Insights 

Sector-based strategies for promoting energy efficiency and clean energy investment may be 

required due to varying economic trends (i.e., declining or increasing production and 

profitability), as well as characteristics such as the industry’s sensitivity to energy cost 

fluctuations, average firm size, the homo- or heterogeneity of manufacturing processes within 

the sector, and the sector’s geographic distribution. 

2.4.1 Economic Production 

A sector’s economic production trends have important implications for energy management 

strategies. For example, industries undergoing growth in production may be less capitalrestricted than sectors with declining production and may also be receptive to efforts to improve 

their competitive edge through increased management of energy costs. Moreover, growing 

sectors are adding capacity, which provides the most cost-effective opportunity to install more 

efficient equipment. Targeting energy efficiency efforts on industries with high energy intensity, 

high total energy use, and high economic growth is one obvious strategy for improving 

environmental performance. Table 16 presents recent economic trends for sectors considered 

in this analysis in terms of the annual change in value added and value of shipments from 1997 

to 2004. To distinguish more recent from longer-term trends, the table also presents the annual 

rate of change in these metrics from 2000 to 2004.zz 

Table 16: Annual growth in value added and value of shipments 1997-200445 

NAICS Sector 

Annual Change in Value Added Annual Change in Value of Shipments 

1997 - 2004 2000 - 2004 1997 - 2004 2000 - 2004 

324110 Petroleum refining 5.4% 6.3% 6.6% 5.0% 

3366 Shipbuilding and ship repair 2.7% 5.4% 1.8% 2.4% 

311 Food manufacturing 2.5% 2.5% 0.8% 1.8% 

327310 Cement 2.2% 1.2% 1.5% 1.6% 

325 Chemical manufacturing 1.9% 3.7% 1.5% 1.8% 

321 Wood products (within forest products) 1.8% 2.5% 0.3% 0.2% 

331111 Iron and steelaaa 1.1% 8.3% 1.7% 6.1% 

332813 Metal finishingbbb 0.1% -1.2% -0.3% -2.0% 

3363 Motor vehicle parts manufacturing 0.0% -2.2% -0.1% -2.3% 

322 Pulp and paper (within forest products) -1.2% -3.6% -1.6% -4.0% 

33611 Motor vehicle manufacturing -2.2% 1.9% 0.3% 0.1% 

3313 Alumina and aluminum -2.9% -2.3% -2.4% -2.2% 

3315 Metal casting -3.2% -5.4% -2.4% -3.7% 

zz Census Bureau data were converted to inflation-adjusted 2000 dollars before annual growth rates were calculated. 

aaa Economic data are for the larger NAICS category of iron, steel, and ferroalloy manufacturing (NAICS 33111). 

bbb Economic data are for the larger NAICS category of coating, engraving, and heat treating (NAICS 33281). 

U.S. Environmental Protection Agency 2-32 March 2007 
Current Energy Consumption 

Though presenting annual rates of change is the simplest way to capture long-term trends, this 

approach masks interannual variation, which is particularly worth noting for certain sectors: 

• Though iron and steel and ferroalloy manufacturing shows growth in value added and 

value of shipments over the period, both metrics actually declined from 1997 to 2003 

during a period of industry restructuring. From 2003 to 2004 value added jumped by more 

than 70 percent and value of shipments jumped by more than 45 percent. This turnaround 

was primarily due to a dramatic increase in the price of steel prices driven by surging 

demand for raw materials in Asian countries like China, India, South Korea, and 

Thailand,46 and by the strengthened financial position of the industry post-restructuring. 

• For shipbuilding and ship repair, value added and value of shipments grew relatively 

slowly from 1997 to 2001, then value added increased by almost 30 percent and value of 

shipments jumped by 6 percent from 2001 to 2002. 

• Motor vehicle manufacturing, motor vehicle parts manufacturing, and metal finishing show 

relatively larger degrees of interannual variation. 

Sectors showing economic growth trends include the following: 

• Chemical manufacturing, cement, and petroleum refining are energy-intensive industries 

with consistent growth in economic output. Petroleum refining shows more interannual 

variation than the other two sectors but also shows the strongest growth trend over the 

time period. The sector’s strong economic position is in part due to an industry turnaround 

after considerable consolidation occurred in the 1990s. 

• Food manufacturing is a less energy-intensive sector that shows consistent economic 

growth. Wood products also shows growth over the timeframes considered but had 

greater interannual variation than food manufacturing due primarily to changes in demand 

for construction materials. 

Sectors with declining economic trends include the following: 

• Aluminum, metal casting, and pulp and paper are energy-intensive industries with 

declining economic trends, and thus are likely to face substantial capital constraints that 

affect decision-making about energy efficiency and clean energy investments. 

2.4.2 Sector Composition 

Other economic factors may be considered in developing sector-based strategies for promoting 

investment in energy efficiency and clean energy opportunities, including whether a sector 

consists of many small firms or a few large ones; whether a sector is geographically 

concentrated or dispersed across the country; and as discussed previously, whether energy 

costs comprise a relatively larger or smaller fraction of production costs. Designing policies 

aimed at increasing energy efficiency within a sector may be relatively simpler when a sector 

consists of a small number of large players with similar manufacturing processes, or is 

concentrated in a limited number of geographic regions. Communicating to a large number of 

small firms is more labor-intensive, and such industries may be less influenced by the best 

practices of industry leaders. In addition, sectors that encompass a broad range of 

manufacturing processes (the chemicals industry is one example) might not be well served by a 

homogeneous policy approach to promoting energy efficiency and clean energy investment. 

We characterize each sector in terms of the relative number of firms in the industry, the average 

size of firms comprising the industry, and whether the sector is geographically dispersed across 

the country or concentrated in specific regions. Table 17 summarizes these attributes for the 

U.S. Environmental Protection Agency 2-33 March 2007 
Current Energy Consumption 

sectors included in this analysis; sector-specific write-ups in Chapter 3 provide additional 

information to support these characterizations. 

Table 17: Overview of key economic characteristics by sector 

NAICS Sector 

Economic 

Production Trend 

Relative Firm 

Number 

Relative Firm 

Size 

Geographic 

Distribution 

Energy Cost 

Sensitivityccc 

3313 Alumina and aluminum Declining Few Large Concentrated High 

327310 Cement Increasing Few Large Concentrated High 

325 Chemical manufacturing Increasing Many Small/Largeddd Dispersed High 

311 Food manufacturing Increasing Many Large Dispersed Low 

331111 Iron and steeleee Increasing Few Large Concentrated High 

3315 Metal casting Declining Many Small Concentrated High 

332811 Metal finishingfff Mixed Many Small Concentrated High 

33611 Motor vehicle manufacturing Mixed Few Large Concentrated Low 

3363 Motor vehicle parts 

manufacturing 

Mixed Many Small/Medium Dispersed Low 

324110 Petroleum refining Increasing Few Large Concentrated High 

322 

Pulp and paper (within forest 

products) 

Declining Few Large Concentrated Highggg 

3366 Shipbuilding and ship repair Increasing Few Large Concentrated High 

321 

Wood products (within forest 

products) 

Increasing Few Large Concentrated High 

ccc The energy cost sensitivity rating is primarily based on whether the industry rated higher or lower than the manufacturing 

industries’ benchmark for energy cost per dollar of value added shown in Table 9. 

ddd Certain segments of the chemical manufacturing industry, such as specialty-batch chemicals, are dominated by smaller 

firms, while others, such as commodity chemicals, are dominated by larger firms. 

eee The economic trend assessment for the iron and steel sector is based on Census Bureau data for a larger NAICS category: 

Iron and steel and ferroalloy manufacturing (NAICS 33111). 

fff The economic trend assessment for the metal finishing sector is based on Census Bureau data for a larger NAICS category: 

Coating, engraving, heat treating, and allied activities (NAICS 33281). 

ggg Though the forest products industry (pulp and paper and wood products) is energy intensive, it is important to note that more 

than half of its energy requirements are met by manufacturing byproducts (biomass). The industry has increased utilization 

of its biomass resources, reducing the impact of rising costs for purchased energy. 

U.S. Environmental Protection Agency 2-34 March 2007 
3. Sector Energy Scenarios 

Chapter 3. Sector Energy Scenarios Insights 

3.1 Alumina and Aluminum Each of the 12 sectors addressed in this analysis has 

3.2 Cement implemented various energy efficiency and clean 

3.3 Chemical Manufacturing energy improvements that are reflected in their “base 

case” assessments. Many have committed to further 3.4 Food Manufacturing 

energy intensity reductions through one or more public- 3.5 Forest Products 

private partnerships, including Climate VISION. There 3.6 Iron and Steel 

are continued energy efficiency and clean energy 3.7 Metal Casting opportunities for each sector, both through existing 3.8 Metal Finishing technologies and in the development of new 

3.9 Motor Vehicle Manufacturing technologies and processes. 

3.10 Motor Vehicle Parts Manufacturing 

3.11 Petroleum Refining 

3.12 Shipbuilding and Ship Repair Drawing on current energy consumption data and industry 

trends, as well as future energy consumption projections 

made in two reports produced by the U.S. Department of Energy (DOE), Scenarios for a Clean 

Energy Future (CEF) and EIA’s 2006 Annual Energy Outlook (AEO 2006), Chapter 3 develops 

“base case” and “best case” energy scenarios for the 12 sectors addressed in this analysis. 

Each sector summary is composed of the 

following elements: CEF Projections 

We have included CEF reference case and advanced • Base Case Scenario: energy projections for sector energy consumption to 

– Situation Assessment: Discusses facilitate the assessment of possible fuel-switching trends 

high-level trends affecting sector under business-as-usual and environmentally preferable 

energy use, including economic energy scenarios. However, in several cases CEF energy 

consumption data differ significantly from 2002 production, geographic distribution, Manufacturing Energy Consumption Survey (MECS) data investments in energy efficiency presented in Chapter 2 and from information industry and/or clean fuels, and voluntary representatives have provided regarding current energy commitments to energy efficiency consumption. Such differences may be due to a number of 

and/or greenhouse gas (GHG) factors, most importantly the age of the CEF study 

reduction. (published in 2000 and using energy consumption data 

from 1998) and differences in how sectors are defined. (To – Expected Future Trends: Assesses the extent possible, we have noted how CEF sector business-as-usual energy definitions differ from EPA/North American Industrial 

consumption trends in terms of fuel Classification Code (NAICS) definitions in footnotes.) Thus, 

use and energy intensity through we place greater emphasis on relative energy consumption 

2020. For the eight sectors modeled and fuel mix changes under the CEF scenarios, rather than 

in DOE’s National Energy Modeling absolute energy consumption values. In addition, we 

System (NEMS)—aluminum, include AEO 2006 projections in the base case scenarios to 

cement, chemicals, food, forest identify areas where recent energy trends may be likely to 

produce substantially different future outcomes than those products, iron and steel, metal projected by CEF in 2000. finishing,hhh and petroleum refining—

the trends assessment includes 

hhh Projections are for the larger NAICS category, fabricated metal products (NAICS 332). 

U.S. Environmental Protection Agency 3-1 March 2007 
Sector Energy Scenarios 

reference case (i.e., “business-as-usual”) energy consumption projections made in the 

CEF report and AEO 2006. 

– Environmental Implications: Discusses National Emissions Inventory (NEI) data on 

current energy-related criteria air pollutant (CAP) emissions and carbon dioxide 

emissions projections from AEO 2006. Reviews how expected future energy trends are 

likely to affect energy-related emissions. 

• Best Case Scenario: 

– Opportunities: Evaluates the viability of each of the five energy efficiency and clean 

energy opportunities discussed in Section 2.2.6: cleaner fuels, increased combined 

heat and power (CHP), equipment retrofit/replacement, process improvement, and 

research and development (R&D). For each 

sector, the viability of each opportunity is Why Compare the CEF Reference Case and 

rated “low,” “medium,” or “high” based on Advanced Case Projections? 

conclusions drawn from the reference The industrial manufacturing chapter of the CEF 

material reviewed in connection with this study provides sector-level energy consumption 

analysis. It is important to note that such projections under both a business-as-usual 

rankings are a qualitative (and necessarily reference case and an advanced energy case, 

which captures the impact of a wide range of subjective) assessment of the viability of policies to promote environmentally preferable each opportunity based on research energy outcomes. conducted, rather than a quantitative For the purposes of this analysis, absolute assessment of energy-savings potential. changes in energy consumption (as projected by Where applicable, regulatory and other CEF) are less important than relative differences 

barriers to implementing the opportunities between the two scenarios. 

are discussed. Reporting the CEF projections in Chapter 3 

– Optimal Future Trends: Assesses likely allows us to envision how a “best case” energy 

changes from the base case scenario that scenario might look at the sector level, and how 

would occur under an environmentally it compares with a “base case” energy scenario. 

preferable energy scenario (i.e., increased 

energy efficiency and/or cleaner fuels) in terms of fuel mix, energy intensity, and 

energy consumption changes that effect energy-related criteria air pollutants and 

carbon emissions. For the eight sectors modeled in NEMS, this section also 

summarizes CEF advanced case projections. 

– Environmental Implications: Discusses how the environmentally preferable energy 

scenario differs from the business-as-usual scenario in terms of CAP and GHG (carbon 

dioxide) emissions. 

• Other Reference Materials Consulted: 

– Lists additional data sources and reference materials used in this analysis. 

Appendix A provides an overview of the energy consumption projections used in this analysis 

(CEF and AEO 2006), methodologies and assumptions, and a brief overview of similarities and 

differences between the two projections. On the whole, because it employs more recent energy 

consumption and economic data, AEO 2006 produces a more realistic projection for the 

business-as-usual scenario. However, we include the CEF projections for two primary reasons: 

(1) AEO 2006 does not provide sufficient sector-level detail for its “high technology” case to 

allow development of an advanced energy scenario that could be compared with the reference 

case; and (2) CEF projections are a closer approximation of a “best case” scenario because 

they produce a slower rate of increase in industrial energy consumption and a faster decrease 

in industrial energy intensity than the AEO 2006 high technology case. 

U.S. Environmental Protection Agency 3-2 March 2007 
Sector Energy Scenarios 

The CEF advanced case projections are based on six policy elements that promote more 

aggressive energy efficiency and clean energy improvement through: (1) expanded voluntary 

federal programs such as the CHP Challenge and ENERGY STAR; (2) expanded federal 

informational programs such as energy assessments and equipment labeling; (3) expanded 

investment-enabling programs such as state grant programs, utility incentive programs, and tax 

rebates and credits; (4) mandatory efficiency standards for motors; (5) expanded federal 

demonstration and R&D programs; and (6) a domestic carbon emissions trading program. 

Arguably even more aggressive policies could be envisioned under a “best case” energy 

scenario. However, we have not found other analyses that provide detailed sector-level energy 

consumption projections under comparable business-as-usual and environmentally preferable 

energy scenarios for the industries featured in this analysis. 

U.S. Environmental Protection Agency 3-3 March 2007 
Sector Energy Scenarios: Alumina and Aluminum 

3.1 Alumina and Aluminum 

3.1.1 Base Case Scenario 

Situation Assessment 

The U.S. Geological Survey (USGS) reports that

bauxite is the only raw material used on a Recent Sector Trends Informing the Base Case 

commercial scale in the United States in the 

production of alumina and aluminum (NAICS Number of facilities: ↓

3313). As a general rule, four tons of dried Domestic production: ↓

bauxite is required to produce two tons of Value of shipments: ↓

alumina, which in turn provides one ton of Avg. energy consumption/kg Al produced: ↓

primary aluminum metal (NAICS 331312). As Major fuel sources: Electricity & natural gas 

reported in USGS Mineral Commodity Current economic and energy consumption data are Summaries 2006, in 2005: summarized in Table 18 on page 3-5. 

• Nearly all of the bauxite consumed in this 

country was imported; more than 90 percent was converted to alumina at domestic 

refineries located in Louisiana and Texas. 

• Of the total alumina used domestically, about 90 percent went to primary aluminum 

smelters. 

• Six companies operated 15 primary aluminum smelters at about two-thirds of rated or 

engineered capacity; another four smelters were idle. All modern primary aluminum 

smelting plants employ the “Hall-Heroult” process to reduce alumina to aluminum through 

electrolysis. 47 

Data for 2005 mark a decline in production capacity since 2000, a year in which USGS reported 

that 12 U.S. companies operated 23 primary aluminum smelters across the country. The 

reduction in U.S. aluminum production and capacity since 2000 is in large part due to energy 

pricing pressures, particularly in the Pacific Northwest, where the majority of aluminum smelters 

are located. The aluminum industry showed a decline in value added and value of shipments 

between 1997 and 2004 (see Table 18). 

In 2001, electricity prices soared in response to the combination of high temperatures which 

increased energy demand, and reduced hydroelectric power generation brought on by 

historically low snow packs and regulations mandating the spill of water to aid salmon migration. 

These high prices meant it was more economical for several Pacific Northwest smelters (which 

accounted for over 40 percent of U.S. primary production capacity) to stop production and sell 

back their power (which was on low-cost, fixed price contracts) to the power authority. These 

low-cost electricity contracts were a result of the Northwest Power Act of 1980, which ensured 

that Pacific Northwest smelters would obtain their power from Bonneville Power Administration 

(BPA) at preferential prices. Recently BPA, which controls about half of the power marketed in 

the region, announced it would discontinue all electricity service at preferential prices; 

consequently, many of the smelters operating in this region have remained closed. Continued 

high energy market prices have prevented the restart of many of these smelters, which were 

some of the oldest and, therefore, most energy-intensive operations in the United States.48 In 

2002 energy costs represented approximately 21 percent of the industry’s value added and 

around 7 percent of the industry’s value of shipments49 (see Table 9). 

The industry-wide average energy consumption per kilogram of aluminum production has 

generally declined in recent years through a number of factors: (1) the closure of older, more 

U.S. Environmental Protection Agency 3-4 March 2007 
Sector Energy Scenarios: Alumina and Aluminum 

energy-intensive “Soderberg” smelters in the Pacific Northwest; and (2) the implementation of 

best management energy efficiency practices, including (a) improvements in the molten cryolite 

chemical bath composition; (b) improved training of cell operators and monitoring to reduce 

anode effects (AE); (c) use of improved, computerized cell control systems and other process 

controls to prevent AE; and (d) installation of alumina point feed systems.50 As is the case with 

other capital-intensive industries, replacing older equipment/processes with state-of-the-art 

equipment/processes holds potential for energy efficiency improvement.51 In 2000, typical 

energy consumption achieved by operating smelters was between 13 kWh/kg of Al for state-ofthe-art facilities (e.g., point feed pre-bake) to 20 kWh/kg of Al for older Soderberg smelters 

(many of which were located in the Pacific Northwest and have now been shut down).52 

Aluminum recycling also has an impact on sector energy use, as production from recycled 

aluminum requires only five percent of the energy required for primary ore production.

53 

Recycling one kilogram of aluminum can save up to 14 kilowatt hours of electricity. 

Robert Strieter at the Aluminum Association (AA) noted that for primary aluminum production, 

there are no air-related policy issues that prevent the implementation of measures to increase 

energy efficiency. However, Best Available Retrofit Technology (BART) requirements to address 

regional haze (e.g., installation of sulfur dioxide scrubbers) may exert capital expenditure 

pressures on primary aluminum producers. Similarly, implementing heat recovery technologies 

in remelt furnaces to meet Maximum Achievable Control Technology (MACT) requirements may 

also exert capital expenditure pressures on secondary production (recycling) operations. 

Table 18 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 18: Current economic and energy data for the aluminum industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

-2.9% -2.3% -2.4% -2.2% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

34.3 12.2 21.0% 6.9% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Net Electricity Natural Gas Other 

55% 37% 7% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 9%

 LPG Fuel Oil 

Fraction of natural gas inputs that could be 

met by alternate fuels 

64% 36% 

U.S. Environmental Protection Agency 3-5 March 2007 
Sector Energy Scenarios: Alumina and Aluminum 

Expected Future Trends 

Though the industry may undertake 

energy efficiency improvements to 

control production costs, the recent 

closures of the most inefficient smelters 

and plant-level improvements 

undertaken in response to electricity 

price increases may mean that 

additional efficiency gains may be 

relatively more capital intensive. An 

additional challenge is posed by the 

industry’s trend of declining economic 

production. As noted in CEF: 

“Stagnating markets are poor theaters 

for innovation and investment, and 

instead rely on already depreciated 

equipment to maintain low production 

costs.”54 Given these factors, the 

implementation rate of further efficiency 

improvements is likely to be slow. 

The data examined in this analysis do 

not show a fuel-switching trend in 

response to increases in energy price— 

the primary response has been to shut 

down the most energy-intensive 

facilities, as discussed above. Under the 

business-as-usual scenario, CEF 

projects the aluminum industry energy 

consumption to be dominated by 

purchased electricity and natural gas, 

and economic energy intensity (energy 

consumption per dollar value of output) 

to decrease at the rate of 0.9 percent 

iii per year.

Voluntary Commitments 

The U.S. Aluminum Association (AA) and its members 

participating in Climate VISION have committed to a direct 

carbon intensity reduction in carbon and perfluorocarbon (PFC) 

emissions from the carbon anode consumption process that 

occurs in primary aluminum reduction. As large industrial energy 

consumers, primary aluminum producers also agree to continue 

their efforts to reduce indirect carbon emissions through 

continued energy efficiency improvements. See 

http://www.climatevision.gov/sectors/aluminum/index.html. 

This commitment builds on the efforts of the Voluntary Aluminum 

Industrial Partnership (VAIP), a program that EPA has had with 

the industry since 1995. VAIP reduced PFC emissions by more 

than 45 percent in 2000 compared to the industry’s 1990 

baseline. VAIP’s 2010 target is a 53 percent total carbon 

equivalent reduction from these sources from 1990 levels.a This 

new commitment equates to an additional direct carbon-intensity 

reduction of 25 percent since 2000. See 

http://www.epa.gov/highgwp/aluminum-pfc/. 

The aluminum sector also participates in DOE’s Industries of the 

Future (IOF)/Industrial Technologies Program (ITP) as an 

“Energy Intensive Industry.” ITP’s goals for all energy intensive 

sectors include the following: 

• Between 2002 and 2020, contribute to a 30 percent 

decrease in energy intensity. 

• Between 2002 and 2010, commercialize more than 10 

industrial energy efficiency technologies through research, 

development & demonstration (RD&D) partnerships. 

AA targets a 2020 goal to meet or exceed 11 kWh/kg of Al 

through technological and process improvements, such as inert 

anode, wetted cathodes, and non-Hall-Heroult processes. See 

http://www.eere.energy.gov/industry/aluminum/. 

Though energy consumption is projected to decrease across all fuel categories, the largest 

decrease is projected for natural gas (26 percent decline from 1997-2020), with a smaller 

decrease projected for delivered electricity (16 percent). 

CEF reference case projections for the aluminum industry are summarized in Table 19. 

Economic assumptions underlying these projections are that production will grow slowly at the 

rate of 0.2 percent per year, with the value of the industry’s output increasing at the same rate. 

Aluminum is one of the sectors for which CEF made adjustments to the NEMS model used to produce AEO 1999. However, 

CEF projections are for the primary aluminum industry (NAICS 331312), a sub-set of aluminum and alumina (NAICS 3313). 

U.S. Environmental Protection Agency 3-6 March 2007 

iii 
Sector Energy Scenarios: Alumina and Aluminum 

Table 19: CEF reference case projections for the aluminum industry 

1997 Reference Case 2020 Reference Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Natural gas 0.081 31% 0.060 28% 

Delivered electricity 0.183 69% 0.153 72% 

Total 0.264 100% 0.213 100% 

Annual % change in economic energy intensity (energy consumption per dollar value of output) -0.9% 

Overall % change in energy use (1997-2020) -19% 

In an effort to assess the impact of recent trends that may have affected aluminum industry 

energy consumption since the CEF report was produced, we also examined reference case 

energy consumption projections produced in connection with EIA’s Annual Energy Outlook 2006 

(AEO 2006), which also uses the NEMS model but incorporates more recent energy and 

economic data. AEO 2006 data provide more detailed fuel consumption data than CEF and give 

a better indication of how high electricity prices in the Pacific Northwest have affected sector 

energy consumption—namely, indicating increased reliance on natural gas and other fossil fuel 

inputs at the expense of purchased electricity. According to AEO 2006, in 2004 the aluminum 

industry’s fuel mix was 47 percent purchased electricity and 34 percent natural gas, with 

petroleum (11 percent, mainly petroleum coke) and coal (8 percent) comprising the remaining 

fractions. From 2004 to 2020, AEO 2006 projects the sector’s energy consumption to fall by 11 

percent. Natural gas and coal consumption remains static over the period, while purchased 

electricity falls by 18 percent and petroleum coke consumption falls by 24 percent. In 2020, 

electricity is projected to meet 43 percent of the sector’s energy needs, compared with 38 

percent for natural gas. 

Environmental Implications 

Figure 6: Aluminum sector: energy-related CAP emissions 

Aluminum Sector: 

NEI CAP Emissions 

(Total: 536,000 tons) 

Energyrelated 

14% 

All other* 

86% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Aluminum Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 73,000 tons) 

CO 

9% 

PM10 

1% 

SO2 

70% 

VOC 

2% 

NH3 

<1% 

NOX 

18% 

Source: Draft 2002 NEI 

Figure 6 compares NEI data on energy-related CAP emissions with non-energy-related CAP 

emissions for the aluminum sector. According to the figure, energy-related CAP emissions are a 

relatively small fraction of total emissions; however, NEI data attribute emissions from the 

generation of purchased energy to the generating source, not the purchasing entity. Therefore, 

U.S. Environmental Protection Agency 3-7 March 2007 
Sector Energy Scenarios: Alumina and Aluminum 

energy-related emissions from an electricity-dependent sector like aluminum will be 

underestimated. Hydroelectric power—a cleaner form of electricity generation than fossil fuel— 

has historically met a substantial fraction of the sector’s purchased electricity requirements. 

According to NEI data on emissions by fuel usage (shown below in Figure 7), 18 percent of the 

energy-related CAP emissions shown in Figure 

6 are from natural gas consumption, and 78 

percent are from coal consumption. Coal Effects of Energy-Related CAP Emissions 

meets a relatively small fraction of the sector’s SO2 and NOx emissions contribute to respiratory illness 

energy needs (less than 0.1 percent of total and may cause lung damage. Emissions also 

fuel inputs according to MECS, and contribute to acid rain, ground-level ozone, and 

approximately 8 percent according to AEO reduced visibility. 

2006), where natural gas comprises around 30 

percent. Thus, the figures demonstrate the 

emissions intensity of coal inputs as compared with natural gas. 

Figure 7: Aluminum sector: CAP emissions by source category and fuel usage 

Aluminum Sector: 

Energy-Related CAP Emissions by Source 

(Total: 73,000 tons) 

External 

Combustion 

Boilers 

82% 

Industrial 

Processes 

18% 

Internal 

Combustion 

Engines 

<1% 

Other 

<1% 

Source: Draft 2002 NEI 

Aluminum Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 73,000 tons) 

Coal 

78% 

By-product 

Coke Mfg. 

2% 

Distillate Oil 

1% 

Unknow n 

1% 

All Others 

<1% 

Natural Gas 

18% 

Source: Draft 2002 NEI 

Figure 7 presents NEI data on the source categories for energy-related CAP emissions shown 

in Figure 6, as well as emissions by fuel usage. The data suggest that coal-fired external 

combustion boilers are the source of the majority of energy-related CAP emissions recorded in 

NEI. However, given the relatively small coal fraction as a percentage of total fuel inputs for the 

sector, such boilers are likely only in use at a small number of facilities. According to NEI data, 

key opportunities for reducing the environmental impacts of sector energy use lie with efficiency 

improvements to external combustion boilers. Opportunities for emissions reduction also lie in 

the area of process improvement, as industrial processes contribute to 18 percent of energyrelated CAP emissions. In one DOE/ITP example, during electrolysis more than 45 percent of 

energy inputs are lost as heat from the cathode and anode. At the same time, onsite energyrelated CAP emissions are small compared with other sectors considered in this analysis— 

73,000 tons per year compared with more than 700,000 tons per year for the chemical 

manufacturing industry. 

At a system-wide level, the sector’s declining energy consumption trend will reduce energyrelated CAP emissions. AEO 2006 projections indicate that sector energy use is shifting 

somewhat from the utility (purchased electricity) to the facility level (fossil fuels) in terms of the 

relative contribution of various fuel inputs to total energy consumption. However, AEO 2006 

does not project any substantial increases in fossil fuel consumption that would increase 

energy-related CAP emissions at the facility level, with natural gas and coal consumption 

remaining relatively static, and petroleum coke consumption declining. At the utility level, the 

U.S. Environmental Protection Agency 3-8 March 2007 
Sector Energy Scenarios: Alumina and Aluminum 

expected decrease in purchased electricity requirements would decrease energy-related CAP 

emissions, particularly given the magnitude of energy losses associated with electric power 

generation, transmission, and distribution. 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 46.5 million metric tons in 2004, including emissions 

associated with offsite electricity generation. (Additional carbon emissions arise from anode 

consumption, but such emissions are not considered energy related.) In line with the expected 

decrease in total energy consumption, AEO 2006 projects that the aluminum industry’s carbon 

dioxide emissions will decline at the annual rate of 1 percent per year, reaching 38.6 million 

metric tons by 2020. 

3.1.2 Best Case Scenario 

Opportunities 

Table 20 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 20: Opportunity assessment for the aluminum industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low Due to the sector’s dependence on purchased electricity, the environmental impact of energy 

inputs will follow regional trends for electric generation. There may be some opportunity for 

clean fuels improvement through increased use of renewable energy, either at the facility 

level or in electric generation. However, much of the industry is concentrated in the 

Northwest where electricity generation is already largely hydroelectric. 

Increased CHP Low The aluminum industry has not invested in CHP to an extensive degree, perhaps due to cost 

considerations and regulatory uncertainties as well as technical constraints (for example, if 

the electricity load is significantly larger than the thermal load, there might not be sufficient 

waste heat to generate sufficient amounts of power). However, DOE’s Industries of the 

Future Program identified CHP as an area for further research and demonstration projects to 

determine viability.

55 New CHP installations also face barriers in terms of utility 

interconnection requirements if electricity production is expected to exceed onsite demand, 

and also from NSR/PSD permitting.56 

Equipment retrofit/ 

replacement 

Medium For capital-intensive industries, CEF predicts that the largest efficiency gains will come from 

replacement of old equipment with state-of-the-art equipment. 57 Installation of alumina point 

feed systems is a currently available technological retrofit that improves energy efficiency. 

However, the industry’s economic circumstances (declining production and pressure from 

foreign competition) are an important constraint on capital investment. 

Process 

improvement 

Medium There are multiple process-related energy-savings opportunities currently available such as 

increased waste reduction and recycling, improvements in molten cryolite chemical bath 

composition, and improved process controls and monitoring. The frequency and duration of 

anode effects (spikes in voltage caused by changes in the chemical composition of the 

electrolytic bath) may be reduced through operator training as well as process control 

improvements, improving energy efficiency and reducing PFC emissions.58 

R&D Medium The aluminum sector has developed mission statements and roadmaps for crucial R&D 

priority efforts as part of its efforts with DOE/IOF; see 

http://www.eere.energy.gov/industry/aluminum/. The theoretical minimum energy 

consumption in aluminum primary production via electrolysis is 5.99 kWh/kg of Al 

produced.59 A number of technologies and processes that would substantially reduce sector 

energy consumption have a long R&D history and are still a long way from commercial 

implementation, including inert anode and wettable cathodes as replacements for carbon 

anodes and cathodes in existing Hall-Heroult processes (theoretical energy savings would 

be achieved through the combined use of inert anode and wettable cathodes), as well as 

technologies that would replace the Hall-Heroult process in its entirety, such as carbothermic 

and kaolinite reduction processes.60 

U.S. Environmental Protection Agency 3-9 March 2007 
Sector Energy Scenarios: Alumina and Aluminum 

Opportunity Ranking Assessment (including potential barriers) 

The sector has identified technical, cost, and institutional barriers to full-scale implementation 

and is also concerned that implementing wettable cathodes would require replacement of 

existing carbon pot-lining, a listed hazardous waste under the Resource Conservation and 

Recovery Act (RCRA). 

Optimal Future Trends 

CEF does not project a major shift in the aluminum sector’s fuel mix under its advanced energy 

scenario, with energy consumption decreasing by roughly 29 percent across all fuel types. (As 

indicated previously, more recent projections in AEO 2006 indicate that a relatively greater share 

of energy requirements will be met by natural gas and a relatively smaller share met by purchased 

electricity. However, as AEO 2006 does not provide sector-specific data for its advanced energy 

scenario, we refer only to CEF data in this section.) Energy intensity is projected to decrease at a 

greater annual rate than under the base case scenario, primarily through faster replacement of 

aging equipment with energy-efficient equipment, and accelerated implementation of promising 

new technologies such as inert anodes and wettable cathodes. Under the advanced energy 

scenario, CEF projects total aluminum sector energy use to fall by 29 percent from 1997 levels by 

2020, compared with a 19 percent reduction in the base case scenario. 

As with CEF’s projections for all sectors, economic assumptions are the same under the 

advanced case scenario as the reference case (growth in production and value of output at 0.2 

percent per year). (See Appendix A-2 of the CEF report for more detailed descriptions of CEF’s 

modeling assumptions under the business-as-usual and advanced energy scenarios.) Table 21 

summarizes the CEF advanced case projections for the aluminum industry. 

Table 21: CEF advanced case projections for the aluminum industry 

1997 Advanced Case 2020 Advanced Case 

Consumption 

(quadrillion Btu) jjj 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Natural gas 0.081 31% 0.058 31% 

Delivered electricity 0.184 69% 0.129 69% 

Total 0.265 100% 0.187 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -1.5% 

Overall % change in energy use (1997-2020) -29% 

Environmental Implications 

The greatest environmental benefits from increased energy efficiency in the aluminum industry 

occur outside the facility at the electric power generation level, due to the reductions in 

purchased electricity and also the reduced carbon intensity of electric generation under CEF’s 

advanced scenario. Under the advanced energy scenario, CEF projects that the aluminum 

industry will achieve a 51 percent reduction in 1997 carbon emissions levels by 2020. As carbon 

jjj As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel 

consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF 

analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as 

compared with the reference case. 

U.S. Environmental Protection Agency 3-10 March 2007 
Sector Energy Scenarios: Alumina and Aluminum 

projections are based on primary energy consumption rather than delivered energy 

consumption, this decrease is larger than the sector’s projected decrease in delivered energy 

consumption due to the energy losses associated with electric power generation, transmission, 

and distribution. 

At the same time, it is important to note that electric power generation losses are largest for 

fossil fuel-fired plants, and thus effects on energy-related CAP and carbon emissions would vary 

depending upon local sources of power. Still, given the geographic concentration of the 

aluminum industry, CAP emissions reductions are more likely to be concentrated with 

associated benefits to regional air quality. The benefits of GHG emissions reductions occur on a 

global level. 

At the facility level, reduced GHG and CAP emissions would be achieved through reductions in 

consumption of natural gas, coal, and petroleum coke. NEI data suggest that reductions in 

sector energy consumption through efficiency and clean energy improvement will have the 

greatest effect on emissions of sulfur dioxide and nitrogen oxides. 

3.1.3 Other Reference Materials Consulted 

Personal communication with Robert Strieter, Vice President, Environmental, Health and Safety, Aluminum Association. March 

1, 2006. 

The Aluminum Association, Inc. Energy Policy Position. Internet source. Available at 

http://www.aluminum.org/Content/NavigationMenu/The_Industry/Government_Policy/Energy/Energy.htm\. 

U.S. Department of Energy. Energy and Environmental Profile of the U.S. Aluminum Industry. July 1997. Available at 

http://www.eere.energy.gov/industry/aluminum/pdfs/aluminum.pdf. 

U.S. Department of Energy. Aluminum Industry of the Future. November 1998. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency. Voluntary Aluminum Industrial Partnership. Internet source. (Updated March 8, 2006). 

Available at http://www.epa.gov/highgwp/aluminum-pfc/resources.html. 

U.S. Geological Survey. Mineral Commodity Summaries: Bauxite and Alumina, and Aluminum. 2001. Available at 

http://minerals.er.usgs.gov/minerals/pubs/mcs/2001/mcs2001.pdf. 

U.S. Geological Survey. Mineral Commodity Summaries: Bauxite and Alumina, and Aluminum. 2006. Available at 

http://minerals.er.usgs.gov/minerals/pubs/mcs/2006/mcs2006.pdf. 

U.S. Environmental Protection Agency 3-11 March 2007 
Sector Energy Scenarios: Cement 

3.2 Cement Recent Sector Trends Informing the Base Case 

3.2.1 Base Case Scenario Number of facilities: Virtually unchanged 

Domestic production: ↑

Situation Assessment Value of shipments: ↑

Avg. energy consumption/ton of cement produced: ↓ Cement manufacturing (NAICS 327310) 

requires the thermochemical processing (i.e., Major fuel sources: Coal & petroleum coke 

pyroprocessing) of substantial amounts of Current economic and energy consumption data are 

limestone, clay, and sand in huge kilns at very summarized in Table 22 on page 3-13. 

high and sustained temperatures to produce 

an intermediate product called clinker. Clinker 

is then ground up with a small quantity of gypsum to create portland cement, which is used as a 

binding agent in virtually all concrete. 

Kilns can employ either wet or dry processes. The wet process was developed to improve the 

chemical uniformity of the raw materials, which was a deficiency in original dry kiln designs. 

Technological improvements in the grinding of raw materials have improved the chemical 

uniformity of the clinker, which has enabled producers to return to the dry process and benefit 

from its lower energy consumption. On average, wet process operations use 34 percent more 

energy per ton of production than dry process operations.61 No new wet kilns have been built in 

the United States since 1975,62 and approximately 80 percent of U.S. cement production 

capacity now relies on the dry process technology.63

While 39 companies operate 115 cement plants in 36 states,64 cement production is somewhat 

concentrated geographically, with six states—Texas, California, Pennsylvania, Missouri, 

Michigan, and Alabama, in descending order—accounting for approximately 50 percent of 

production in 2005.65 From 1997 to 2004 the cement industry showed economic growth in terms 

of value added and total value of shipments (see Table 22), mainly in response to a strong 

construction market. Most of the U.S. demand for cement is met by domestic production. 

Operating at maximum capacity, in 2004 U.S. facilities produced 95 million metric tons of 

cement, an increase of 2 percent over 2003.66 Although a slowdown of the U.S. economy is 

expected, industry experts predict cement consumption in 2006 to reach 129.6 million tons, an 

increase of 2.3 percent compared with 2005 levels, extending a three-year period of continual 

growth. Additional growth in cement consumption of 1.2 percent is forecasted for 2007.67 To 

meet increasing demand, U.S. cement manufacturers have announced plans to increase 

production capacity by 15 percent (nearly 15 million tons) by 2010.68

The cement industry currently participates in EPA’s Sector Strategies Program. 

The cement industry is highly dependent on emissions-intensive energy sources: coal (60 

percent of fuel inputs in 2004) and petroleum coke (16 percent).69 In recent years, the sector 

has shown increased use of lower-cost waste fuels (primarily tires and used motor oil), and 

slight decreases in the use of natural gas and coal.70 In 2002, 15 plants used waste oil, and 40 

plants in 23 states used scrap tires; solvents, unrecyclable plastics, and other waste materials 

were also used as fuels.71 Cement kiln dust (CKD) is routinely recycled to the kilns, which also 

can burn a variety of waste fuels (e.g., scrap tires, used motor oil, and paint wastes) and 

alternative raw materials such as foundry sand, slags, and coal combustion fly ash.72 Energy 

intensity (as measured in terms of energy use per ton of cement production) fell by 7 percent 

from 2001 to 2004.73 

As is the case with other capital-intensive industries, replacing old equipment with state-of-theart equipment holds potential for energy efficiency improvement.74 Options include replacing wet 

U.S. Environmental Protection Agency 3-12 March 2007 
Sector Energy Scenarios: Cement 

process kilns with new dry process kilns, adding multistage suspension preheaters (i.e., a 

cyclone) or shaft preheaters, and using high-pressure roller mills and horizontal roller mills in 

place of ball mills as a grinding technology. In 2006, a cement industry Energy Performance 

Indicator (EPI) was developed by EPA’s ENERGY STAR Industrial Focus program in 

cooperation with the Portland Cement Association (PCA) and with technical support from the 

Argonne National Laboratory. EPI scores the energy efficiency of a single cement plant and 

allows the plant to compare its performance to that of the entire industry. The tool is intended to 

help cement plant operators identify opportunities to improve energy efficiency, reduce GHG 

emissions, conserve conventional energy supplies, and reduce production costs.75 

Table 22 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 22: Current economic and energy data for the cement industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

2.2% 1.2% 1.5% 1.6% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

95.5 56.0 24.5% 15.1% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Coal Otherkkk Net Electricity Natural Gas Coke & Breeze 

58% 23% 11% 5% 2% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 29% 

Coal Fuel Oil LPG 

Fraction of natural gas inputs that could be 

met by alternate fuels 

67% 50% 17% 

Fuel-Switching Potential in 2002: Coal to Alternate Fuels 

Switchable fraction of coal inputs 51% 

Natural Gas Other LPG 

Fraction of coal inputs that could be met by 

alternate fuels 

91% 8% 4% 

kkk “Other” includes petroleum coke as well as waste materials that are incinerated for fuel. 

U.S. Environmental Protection Agency 3-13 March 2007 
Sector Energy Scenarios: Cement 

Expected Future Trends 

Cement is one of three sectors (along Voluntary Commitments with paper and steel) for which CEF made 

detailed parameter modifications to the Under its Climate VISION commitment, PCA seeks to achieve a 

NEMS model used to produce AEO 99. 10 percent reduction in 1990-level carbon dioxide emissions per 

Modifications included adjustments to ton of cementitious product produced or sold by 2020. The 

baseline energy intensities and rates for industry will achieve this goal and foster further reductions by 

annual improvements in energy intensity, end users of cement products through the implementation of a 

which were adjusted to reflect best- three-part strategy to: (1) improve energy efficiency by 

upgrading plants with state-of-the-art equipment; (2) improve available sector-specific research. product formulation to reduce energy of production and minimize 

Under the reference case scenario, CEF the use of natural resources; and (3) conduct research and 

develop new applications for cement and concrete that improve projects the cement industry’s fuel mix to energy efficiency and durability. Efficiency improvement from the be dominated by coal, as it is today.lll 

first two elements of this plan will contribute to achieving the 10 Economic energy intensity (energy percent reduction goal. While reductions from the product 

consumption per dollar value of output) is application element will not count towards the goal, the carbon 

projected to decrease very slightly at the dioxide reduction benefits of cement and concrete use could be 

rate of 0.1 percent per year, and overall even more significant than those achieved through 

energy consumption is projected to manufacturing and product formulation. The U.S. cement 

decline by 2 percent from 1997 to 2020. industry has also adopted a voluntary target of a 60 percent 

CEF’s analysis suggests that as long as reduction (from a 1990 baseline) in the amount of CKD disposed 

fuel prices remain low, facilities will have per ton of clinker produced by 2020. See 

http://www.climatevision.gov/sectors/cement/index.html. little incentive to invest in capital-intensive 

upgrades of existing facilities, and 

increases in energy efficiency will primarily be achieved through the retirement of old plants with 

wet kiln capacity and the construction of new plants with dry kiln capacity. Increased energy 

efficiency in cement kilns will result in reduced coal consumption. 

CEF’s reference case projections for the cement industry are based on the assumptions that 

production will grow at 1 percent per year, and value of output will grow at 1.1 percent per year. 

The sector’s declining energy intensity is thus a function both of slow rates of decline in energy 

consumption and faster rates of increase in economic production. CEF also assumes that wet 

process clinker production will decline at 2.2 percent per year, comprising 13 percent of total 

production by 2020. 

CEF projections support the expectation of incremental efficiency improvement for the cement 

industry, rather than large-scale efficiency gains, and are summarized in Table 23. 

lll According to USGS data presented in the 2006 Sector Strategies Performance Report, 16% of the sector’s energy supply 

was met by petroleum coke, which is a slightly larger fraction than is represented by data used in the CEF analysis. 

U.S. Environmental Protection Agency 3-14 March 2007 
Sector Energy Scenarios: Cement 

Table 23: CEF reference case projections for the cement industry 

1997 Reference Case 2020 Reference Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.036 9% 0.033 8% 

Natural gas 0.018 5% 0.014 4% 

Coal 0.315 79% 0.313 80% 

Delivered electricity 0.030 8% 0.031 8% 

Total 0.399 100% 0.391 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -0.1% 

Overall % change in energy use (1997-2020) -2.0% 

In an effort to assess the impact of recent trends that may have affected cement industry energy 

consumption since the CEF report was produced, we also examined reference case energy 

consumption projections produced in connection with EIA’s Annual Energy Outlook 2006 (AEO 

2006), which also uses the NEMS model but incorporates more recent energy and economic 

data. Where CEF projects a slight decline in sector energy consumption, AEO 2006 projects 

that sector energy consumption will increase by 10 percent from 2004 to 2020, driven by annual 

growth in the industry’s value of shipments of 2.1 percent per year. However, energy intensity 

(energy consumption per dollar value of output) is expected to decrease at the rate of 0.7 

percent per year—a faster rate of decline than projected by CEF. Though all fuel inputs are 

projected to increase, AEO 2006 projects the largest increases for natural gas and purchased 

electricity. Still, by 2020 AEO 2006 projects no substantial change in the overall fuel mix, with 

coal meeting 60 percent of the sector’s energy demand and petroleum (mainly petroleum coke) 

meeting 23 percent (these fractions are similar to MECS energy consumption data from 2002). 

Environmental Implications 

Figure 8: Cement sector: energy-related CAP emissions 

Cement Sector: 

NEI CAP Emissions 

(Total: 545,000 tons) 

Energyrelated 

8% 

All other* 

92% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Cement Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 41,000 tons) 

CO 

38% 

PM10 

2% 

SO2 

31% 

NOX 

28% NH3 

Source: Draft 2002 NEI <1% 

VOC 

1% 

U.S. Environmental Protection Agency 3-15 March 2007 
Sector Energy Scenarios: Cement 

Figure 8 compares NEI data on energy-related 

CAP emissions with non-energy-related CAP Effects of Energy-Related CAP Emissions 

emissions for the cement sector. Although NEI SO2 and NOx emissions contribute to respiratory illness 

data attribute emissions from electric power and may cause lung damage. Emissions also 

generation to the generating source rather than contribute to acid rain, ground-level ozone, and 

the purchasing entity, because purchased reduced visibility. 

electricity comprises a small fraction of the 

cement sector’s energy requirements, NEI data provide a relatively complete picture of the 

industry’s energy-related CAP emissions. However, the ratio of energy-related CAP emissions 

to total CAP emissions appears smaller than expected for an energy-intensive sector. As noted 

in Section 2.3.3, the majority of the sector’s energy requirements and associated emissions 

result from the thermoreduction of limestone, clay, and sand in a process that uses coal both as 

a fuel and a feedstock. Given that NEI data for the cement industry only classify 8 percent of the 

sector’s total CAP emissions as “energy-related,” it appears likely that NEI data misclassify 

some CAP emissions resulting from this process as non-energy-related. 

According to NEI data, 66 percent of the sector’s energy-related CAP emissions are due to coal 

consumption (see Figure 9). As a result, sulfur dioxide and nitrogen oxides (both linked to coal 

combustion) are fairly equal contributors to energy-related CAP emissions. (As noted in Section 

2.3.3, NEI data on carbon monoxide emissions appear higher than would be expected for 

stationary sources, so we do not address carbon monoxide data in our assessment of CAP 

emissions for each sector.) 

Figure 9: Cement sector: CAP emissions by source category and fuel usage 

Cement Sector: 

Energy-Related CAP Emissions by Source 

(Total: 41,000 tons) 

Other 

<1% 

External 

Combustion 

Boilers 

16% 

Internal 

Combustion 

Engines 

2% 

Industrial 

Processes 

82% 

Source: Draft 2002 NEI 

Cement Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 41,000 tons) 

Coal 

66% 

Natural Gas 

9% 

Coke 

8% 

Distillate Oil 

8% 

Solid Waste 

4% 

All Others 

5% 

Source: Draft 2002 NEI 

Figure 9 presents NEI data on the source categories for energy-related CAP emissions shown 

in Figure 8, as well as emissions by fuel usage. According to DOE data, fuel inputs into fired 

systems such as kilns, preheaters, and precalciners comprise the majority of sector energy 

consumption,76 and these systems are classified under the “industrial processes” category in 

NEI. Given AEO 2006’s projected increases in economic production and energy consumption 

for the cement industry, increases in energy-related CAP emissions are expected, which will 

primarily occur at the facility level from coal combustion. 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 40.1 million metric tons in 2004. (Additional carbon 

emissions arise from the calcination of limestone, but such emissions are not classified as 

energy-related.) The projected increase in sector energy consumption is projected to increase 

carbon emissions to 44 million metric tons by 2020, at a slightly slower rate than the projected 

energy consumption increase due to expected energy efficiency improvements. 

U.S. Environmental Protection Agency 3-16 March 2007 
Sector Energy Scenarios: Cement 

3.2.2 Best Case Scenario 

Opportunities 

Table 24 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 24: Opportunity assessment for the cement industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Medium The majority of the industry’s energy inputs are met with coal—a relatively inexpensive but 

emissions-intensive energy source. To the extent possible, the cement industry uses 

inexpensive waste fuels in its kilns (tires, waste paints, oils, and carpet) to reduce energy 

costs. The primary environmental benefits of waste fuel use is avoided landfilling and more 

complete combustion than would be offered by most commercial incinerators due to higher 

temperatures and longer residence time in kilns.77 

Some waste fuels may be subject to either federal or state RCRA hazardous waste 

regulations or state solid waste regulations. For example, paint wastes and used oil may 

be categorized as hazardous waste and, thus, could require plants to obtain hazardous 

waste permits to burn these materials as fuels. The cement sector also faces technical 

barriers to greater waste fuel use (e.g., kilns can generally not use more than 25 percent 

tires, because the zinc slows down setting time) and supply constraints in terms of the 

long-term stability of sufficient quantities of alternate fuels to meet demand. 

Increased CHP Low There may be opportunities for increased cogeneration of electricity in the cement industry, 

particularly if such applications are part of the design for new plants.78 Such opportunities 

would primarily involve systems to recover heat from exhaust systems and generate 

electricity onsite. There are also opportunities for increased waste heat recovery, 

particularly through waste heat utilization in preheater heat exchange systems.79 However, 

the CEF report notes that there may be little incentive to devote capital to waste heat 

recovery systems as long as the industry is able to obtain low-cost energy (coal, waste 

fuels, etc.). 

Equipment retrofit/ 

replacement 

High Given the magnitude of kiln-related energy requirements, DOE references the following 

equipment replacement and retrofit opportunities to improve the efficiency of both wet and 

dry kilns: installation/upgrades of preheat systems, enhanced heat recovery in the clinker 

cooler, and more efficient grate coolers.80 Grinding technology improvements such as 

replacing ball mills with high pressure roller mills or horizontal roller mills is another 

example of an energy efficiency improvement opportunity for the cement industry.

81 At the 

same time, ball mills generally provide better mixing than roller mills, so roller mills may not 

meet production-related requirements. 

The expected life of onsite limestone reserves may be a determinant in selecting a retrofit 

or equipment replacement option. If reserves are limited, small retrofits are more likely to 

be implemented than full-scale equipment replacement. If reserves are substantial, sites 

are more likely to undertake larger capital investments, which might include energy 

efficiency improvements.82 

Process 

improvement 

High A recent study notes that the greatest opportunities for reducing energy consumption and 

lowering emissions lie with improvements in cement pyroprocessing, which currently 

operates at 34 percent thermal efficiency.

83 In an example of a full-scale process change, 

the cement industry is transitioning from wet process kilns to dry process kilns, which leads 

to substantial reductions in energy use per ton of production. The kiln replacement process 

is slow not due to regulatory considerations but economic considerations—specifically, 

capital constraints and the long operational lifetime for kilns (30-40 years), which mean that 

changes in the number and types of kilns occur slowly, and typically only when the kiln has 

reached the end of its useful life, because operating cost savings are insufficient to justify 

early retirement of the expensive capital. (At the same time, PCA estimates that nearly 44 

percent of U.S. clinker production capacity is older than 30 years.) Opening new dry kilns 

would trigger NSR review and other requirements (e.g., Maximum Achievable Control 

Technology (MACT) standards for cement kilns; new NESHAPs for portland cement once 

finalized); however, the long-term and continuing conversion from wet to dry kilns indicates 

that this is not an insurmountable barrier to adopting the more energy-efficient dry process. 

U.S. Environmental Protection Agency 3-17 March 2007 
Sector Energy Scenarios: Cement 

Opportunity Ranking Assessment (including potential barriers) 

CEF cites pollution prevention and waste recycling as having potential to achieve efficiency 

improvements in the cement industry.

 84 Alternative raw materials for cement clinker 

production and cement blending (e.g., foundry sand) may be used; these alternative raw 

materials reduce energy consumption by reducing the amount of virgin raw materials that 

need to be quarried for the cement kilns or reducing the amount of cement clinker that 

needs to be blended into the cement product. Other process-related opportunities include 

reducing pyroprocessing energy use through increasing blending and using alternative 

clinker materials,85 combustion system optimization, and adaptation to semi-wet 

conversion processes (wet kilns).86 

R&D Medium Fluidized-bed kilns are an emerging technology that shows capital and operational savings 

over dry kilns and may be adopted when existing kilns are slated for replacement. R&D 

efforts focusing on reducing energy requirements in pyroprocessing offer the greatest 

opportunities for improved environmental performance. A recent study notes the following 

areas of R&D opportunities: developing less energy-intensive cement manufacturing 

processes; developing systems for biomass fuel usage in kilns; and developing systems 

for increased waste fuel utilization.87 

Optimal Future Trends 

Given more recent AEO 2006 projections that indicate an increasing energy consumption trend 

for the cement industry, CEF’s reference case projections appear outdated, calling into question 

the validity of its advanced case projections. However, AEO 2006 does not provide sectorspecific data for its advanced energy scenario, and we must use the CEF study to approximate 

an environmentally preferable energy consumption trend for the cement industry. 

Under its advanced case projections, CEF projects no major change to the cement industry’s 

dependence on coal but shows larger declines in coal inputs than in petroleum and electricity 

input, and a slight increase in natural gas consumption. Rather than a fuel-switching trend that 

replaces coal with other energy inputs, the declining coal fraction is the result of reduced energy 

use in kilns through more aggressive introduction of blended cements in the U.S. market, and 

faster retirement of wet process clinkers with replacement by modern preheater precalciner dry 

process kilns. For dry process plants, energy efficiency opportunities reflected in the CEF 

projections include optimized heat recovery in the clinker grate cooler and conversion to grate 

clinker coolers. For wet process plants, conversion to semi-wet processes and kiln combustion 

system improvements produce additional energy efficiency gains. Cross-cutting energy 

efficiency improvements are achieved through preventative maintenance best practices, 

improved process control through control system installations, and installation of energy 

management systems. 

As with CEF’s projections for all sectors, economic assumptions are the same under the 

advanced case scenario as the reference case (growth in production of 1 percent per year and 

growth in value of output at 1.1 percent per year). (See Appendix A-2 of the CEF report for more 

detailed descriptions of CEF’s modeling assumptions under the business-as-usual and 

advanced energy scenarios.) Given current expectations of production growth for the industry 

and AEO 2006 reference case projections, it is unlikely that an advanced energy scenario would 

achieve such aggressive reductions in energy consumption. 

U.S. Environmental Protection Agency 3-18 March 2007 
Sector Energy Scenarios: Cement 

CEF’s advanced case projections are shown in Table 25. 

Table 25: CEF advanced case projections for the cement industry 

1997 Advanced Case 2020 Advanced Case 

Consumption 

(quadrillion Btu) mmm 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.036 9% 0.034 11% 

Natural gas 0.018 5% 0.030 10% 

Coal 0.316 79% 0.216 70% 

Delivered electricity 0.030 8% 0.028 9% 

Total 0.4 100% 0.308 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -1.1% 

Overall % change in energy use (1997-2020) -23% 

Environmental Implications 

Though an advanced energy scenario may be unlikely to achieve the energy consumption 

reductions projected by CEF, such a scenario would produce lower CAP emissions at the facility 

level than are expected under a business-as-usual scenario. Conversion to precalciner kilns 

also contributes to NOx emissions reductions. 

Under the advanced energy scenario, CEF projects the cement industry to achieve a 16 percent 

reduction in 1997 carbon dioxide emissions levels by 2020 (compared with an increase of 5.7 

percent projected under the reference case). 

3.2.3 Other Reference Materials Consulted 

COWIconsult, March Consulting Group and MAIN. Energy Technology in the Cement Industrial Sector. Report prepared for CEC 

-DG-XVII, Brussels. April 1992. 

Cembureau. Best Available Techniques for the Cement Industry. Brussels. 1993. 

Greer, W. L., Johnson, M. D., Morton, E.L., Raught, E.C., Steuch, H.E. and Trusty Jr., C.B. “Portland Cement,” in Air Pollution 

Engineering Manual, Anthony J. Buonicore and Waynte T. Davis (eds.). New York: Van Nostrand Reinhold. 1992. 

H. Klee. “The Task at Hand” Cement Americas. November 1, 2005. Internet source. Available at 

http://cementamericas.com/mag/cement_task_hand/. 

Holderbank Consulting. Present and Future Energy Use of Energy in the Cement and Concrete Industries in Canada. CANMET, 

Ottawa, Ontario, Canada. 1993. 

Portland Cement Association. Overview of the Cement Industry. May 2003. Internet source. Available at 

http://www.cement.org/basics/cementindustry.asp. 

R. Grancher. “U.S. Cement: Development of an Integrated Business,” Cement Americas. September 1, 2005. Internet source. 

Available at http://cementamericas.com/mag/cement_us_cement_development/index.html. 

mmm As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel 

consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF 

analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as 

compared with the reference case. 

U.S. Environmental Protection Agency 3-19 March 2007 
Sector Energy Scenarios: Cement 

S. Ellis. “Environmental Update for the Cement Industry,” Cement Americas. May 1, 2003. Internet source. Available at 

http://cementamericas.com/mag/cement_environmental_update/index.html. 

Somani, R.A., S.S. Kothari. Die Neue Zementlinie bei Rajashree Cement in Malkhed/Indien. ZKG International. 1997. 

Steuch, H.E. and Riley, P. “Ash Grove’s New 2200 tpd Seattle Plant Comes on Line,” World Cement. April 1993. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency. DRAFT REPORT: Beneficial Use of Industrial By-Products in Cement Kilns: Analysis of 

Utilization Trends and Regulatory Requirements. April 21, 2005. 

U.S. Environmental Protection Agency. “National Emission Standards for Hazardous Air Pollutants from the Portland Cement 

Manufacturing Industry; Proposed Rule.” Federal Register. December 2, 2005. Available at 

http://www.epa.gov/ttn/atw/pcem/fr02de05.pdf. 

U.S. Environmental Protection Agency. Rule and Implementation Information for Portland Cement Manufacturing Industry. 2002. 

U.S. Environmental Protection Agency. Cement Kiln Dust Waste. Internet source. Available at 

http://www.epa.gov/epaoswer/other/ckd/index.htm. 

U.S. Environmental Protection Agency. Alternative Control Techniques Document – NOx Emissions from Cement Manufacturing. 

Internet source. 1994. Available at http://www.epa.gov/ttn/catc/dir1/cement.pdf. 

U.S. Geological Survey. Mineral Commodity Summaries: Cement. U.S. Geological Survey. U.S. Department of the Interior. 

January 2006. Available at http://minerals.usgs.gov/minerals/pubs/commodity/cement/cemenmcs06.pdf. 

U.S. Geological Survey. Historical Statistics for Mineral Commodities in the United States: Cement. August 2002. Internet 

source. 

Vleuten, F.P. van der. Cement in Development: Energy and Environment. Netherlands Energy Research Foundation, Petten, 

The Netherlands. 1994. 

U.S. Environmental Protection Agency 3-20 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

3.3 Chemical Manufacturing Recent Sector Trends Informing the Base Case 

3.3.1 Base Case Scenario Number of facilities: ↓

Situation Assessment Value of shipments: ↑

Energy intensity: ↓

Chemical manufacturing (NAICS 325) is based on 

the transformation of organic and inorganic raw Major fuel sources: Natural gas, LPG & NGL 

materials through chemical processes to formulate Current economic and energy consumption data are 

products. Chemicals generally are classified into summarized in Table 26 on page 3-22. 

two groups—commodity chemicals and specialty 

chemicals. 

• Commodity chemical manufacturers produce large quantities of basic and relatively 

inexpensive compounds in large plants, often built specifically to make one chemical. 

Since they make essentially equivalent products for general use in everyday consumer 

goods, sales are typically driven by price. Controlling production costs is crucial, which 

provides an incentive for energy efficiency improvements. At the same time, commodity 

plants often run continuously, typically shutting down for only a few weeks a year for 

maintenance. Thus, there is often a limited window of opportunity in which energy 

efficiency-related improvements can be made. 

• Specialty-batch or performance chemical manufacturers produce smaller quantities of 

more expensive chemicals that are used less frequently. Often there is only one or a 

limited number of suppliers producing a given product. As sales are based on product 

performance, controlling production costs may be of less concern than it is for commodity 

chemical manufacturers. 

Both paint and coatings (NAICS 325510) and specialty-batch chemicals (not defined by a 

NAICS code) currently participate in EPA’s Sector Strategies Program. 

The chemical industry uses energy both to supply heat and power for plant operations and as a 

raw material for the production of chemicals, plastics, and synthetic fibers. Many small to 

medium-sized firms comprise the industry, and are concentrated in areas abundant with other 

manufacturing businesses, such as the Great Lakes region near the automotive industry, or the 

West Coast near the electronics industry. Chemical plants are also located near the petroleum 

and natural gas production centers along the Gulf Coast in Texas and Louisiana. Because 

chemical production processes often use water, and chemicals are exported all over the world, 

major industrial ports are another common location of chemical plants. According to the U.S. 

Department of Labor (DOL), in 2002 approximately half of the establishments in the industry 

were located in California, Illinois, New Jersey, New York, Ohio, Pennsylvania, South Carolina, 

Tennessee, and Texas; about 78 percent of sector energy usage was concentrated 

geographically in the South Census Region.88 

From 1997 to 2004 the chemicals sector showed economic growth in terms of value added and 

total value of shipments (see Table 26). However, the number of plants has declined, as has 

employment. As reported by Business Week on May 2, 2005, and quoted by the American 

Chemistry Council in testimony before the Energy and Mineral Resources Subcommittee on 

May 19, 2005, 70 plants closed in 2004 (and businesses had targeted 40 more for shutdown in 

2005), and employment fell below 880,000, down from over 1 million as recently as 2002. High 

energy prices, especially natural gas prices, have been a contributing factor to domestic 

declines, with companies looking to shift production and investment to operations overseas, 

particularly in the commodity chemicals segment of the industry. Approximately 50 percent of 

U.S. methanol production capacity and 40 percent of ammonia production capacity were idled in 

U.S. Environmental Protection Agency 3-21 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

response to increasing natural gas prices after 2000.89 Niche segments of the industry have the 

most favorable economic outlook. DOE notes that the fastest growth is expected for industry 

subsegments like specialty-batch chemicals.90 

Table 26 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 26: Current economic and energy data for the chemical manufacturing industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

1.9% 3.7% 1.5% 1.8% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

15.3 8.5 5.4% 3.0% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Natural Gas Othernnn Net Electricity Coal Fuel Oil 

45% 31% 14% 8% 1% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 10% 

Fuel Oil LPG Electricity 

Fraction of natural gas inputs that could be 

met by alternate fuels 

77% 13% 9% 

Fuel-Switching Potential in 2002: Coal to Alternate Fuels 

Switchable fraction of coal inputs 36% 

Natural Gas Fuel Oil Electricity 

Fraction of coal inputs that could be met by 

alternate fuels 

82% 25% 1% 

Chemical production is highly dependent on natural gas: the sector currently consumes 10 

percent of the U.S. natural gas supply both as fuel and process feedstocks.91 In terms of natural 

gas inputs for fuel use, 55 percent is consumed as boiler fuel (with just over half of that fraction 

used in CHP/cogeneration boilers and the remaining portion used in conventional boilers) and 

40 percent is used for direct process inputs (primarily process heating). The remaining fraction 

is composed of non-process uses such as facility HVAC and conventional electricity production 

(1 percent of natural gas end uses were unreported in MECS).92 Cogeneration and selfgeneration of electricity are important in the chemical industry, with 31 percent of net electricity 

consumption produced through cogeneration processes in 2002.93 

nnn “Other” includes petroleum-derived byproduct gases and solids, hydrogen, and waste materials used as fuel. 

U.S. Environmental Protection Agency 3-22 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

The chemical industry’s prime motivation for energy efficiency is controlling operating and 

production costs (e.g., fuel and raw material costs) in a competitive, worldwide market.94 

Facility-wide approaches to energy efficiency, such as integrated heat exchanged networks to 

maximize the use of waste heat, are well established in the industry. While energy consumption 

in the chemical industry has increased in recent years (increasing 13.2 percent from 1994 to 

2008, and 1.75 percent from 1998 to 2002),95 the sector has reduced energy consumption for 

heat and power per unit of output by at least 39 percent between 1974 and 1995. Energy 

intensity (in terms of fuel consumption per dollar value of shipments) decreased by 

approximately 10.5 percent between 1998 and 2002.96 

Expected Future Trends 

Driven by worldwide growth in demand for Voluntary Commitments chemical products, AGF projects natural 

gas consumption by the chemical Through the Climate VISION program, the American Chemistry 

manufacturing sector to increase through Council (ACC), representing 90 percent of the chemical industry 

production in the United States, has agreed to an overall GHG 2020. Under AGF’s business-as-usual intensity reduction target of 18 percent from 1990 levels by scenario for the chemical manufacturing 2012. ACC will measure progress based on data collected 

industry, natural gas consumption for use directly from its members. ACC also pledges to support the 

in boilers and process heating is expected search for new products and pursue innovations that help other 

to grow at the rate of 1 percent per year industries and sectors achieve the President's goal. Activities 

from 2001 to 2020.97 include increased production efficiencies, promoting coal 

gasification technology, increasing bio-based processes, and Though this analysis does not consider developing efficiency-enabling products for use in other sectors, 

feedstock energy inputs in terms of such as appliances, transportation, and construction. See 

energy-related emissions, feedstock http://www.climatevision.gov/sectors/chemical/index.html. 

energy use has important economic The chemicals sector also participates in DOE’s Industries of the implications for certain sectors. Increases Future (IOF)/Industrial Technologies Program (ITP) as an in the price of natural gas are detrimental “Energy Intensive Industry.” ITP’s goals for all energy intensive to the chemical manufacturing sector in sectors include the following: 

terms of both fuel and feedstock energy 

inputs. AGF notes that subsets of the  Between 2002 and 2020, contribute to a 30 percent 

industry with substantial feedstock use of decrease in energy intensity. 

natural gas will continue to be particularly  Between 2002 and 2010, commercialize more than 10 

industrial energy efficiency technologies through research, affected by high natural gas prices—for development & demonstration (RD&D) partnerships. instance, companies engaged in the 

commodity production of ammonia and See http://www.eere.energy.gov/industry/chemicals/. 

methanol. AGF projects gas consumption 

for these industries to plummet by about 

60 percent between 2000 and 2020 due to energy-related pricing pressures. Despite such 

economic impacts in some subsectors of the industry, AGF projects that overall the chemicals 

sector will continue to grow due to new product development and expansion into new markets.98 

CEF’s projections are for the bulk chemicals industry, which includes industrial inorganic 

chemicals, plastics, industrial organic chemicals, and agricultural chemicals, but does not 

include pharmaceuticals, soaps, detergents, cleaning preparations, paints, varnishes, and 

miscellaneous chemical products. Thus, CEF projections address the commodity chemicals 

subset of the chemical manufacturing industry and do not include the two subsectors that 

currently participate in the Sector Strategies Program: paint and coatings (NAICS 325510) and 

specialty-batch chemicals. It is also important to note that where MECS data identify almost a 

third of the sector’s energy needs as being met by “other” fuels—primarily petroleum-derived 

U.S. Environmental Protection Agency 3-23 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

byproduct gases and solids, hydrogen, and waste materials used as fuel—CEF allocates these 

fuels to the original fuel type that produced such byproducts or waste. 

CEF’s reference case projections are based on the economic assumption that the bulk chemical 

sector’s value of output will increase at 1.1 percent per year. Under the reference case scenario, 

CEF projects that energy consumption for fuel use by the chemicals sector will increase by 13 

percent from 1997 to 2020, primarily driven by continued economic growth. Consumption of all 

fuel types is expected to increase, with the largest percentage increase for coal (30 percent, 

though overall coal remains a small fraction of total energy use), followed by petroleum (20 

percent), purchased electricity (16 percent), and natural gas (9 percent). Energy intensity will 

decrease at a slower rate than the industrial average of 1.1 percent per year, indicating that 

slow adoption of energy-efficient technologies is expected. This projection is unsurprising given 

the thin margins found in the commodity chemicals industry and the fact that due to production 

requirements, opportunities to implement large-scale energy efficiency projects are limited. 

Despite projected consumption increases for other types of fuels, the sector is expected to 

continue to remain dependent on natural gas. Though CEF predicts the fuel mix will shift slightly 

away from natural gas toward petroleum, purchased electricity, and coal, these projections were 

made before recent increases in the price of petroleum and natural gas. Fuel price trends may 

indicate the potential for larger increases in the coal fraction relative to less carbon-intensive 

fuels, though such increases would be constrained by technical and permitting constraints as 

well as fuel availability. According to MECS fuel use tables, chemical manufacturing showed a 

15 percent decline in natural gas consumption and an 11 percent increase in coal consumption 

between 1998 and 2002.

99 However, MECS data also indicate that there is a relatively small 

switchable fraction of natural gas inputs, and coal is not a viable substitute for these inputs. 

Table 27 summarizes the CEF reference case projection for the bulk chemicals sector. 

Table 27: CEF reference case projections for the bulk chemicals industryooo 

1997 Reference Case 2020 Reference Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.479 14% 0.576 15% 

Natural gas 2.188 63% 2.395 61% 

Coal 0.175 5% 0.227 6% 

Delivered electricity 0.637 18% 0.738 19% 

Total 3.479 100% 3.936 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -0.5% 

Overall % change in energy use (1997-2020) 13% 

In an effort to assess the impact of recent trends that may have affected industry energy 

consumption since the CEF report was produced, we also examined reference case energy 

consumption projections for the bulk chemicals subsector produced in connection with EIA’s 

Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS model but incorporates 

more recent energy and economic data. AEO 2006 projects that the subsector’s value of 

shipments will grow at the rate of 0.6 percent per year (slower than CEF’s rate), energy 

consumption will remain relatively static through 2020 (around 2.7 quadrillion Btu, compared 

ooo Energy consumption data do not include fuels used as feedstock. 

U.S. Environmental Protection Agency 3-24 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

with 3.5 quadrillion Btu under CEF’s base case), and energy intensity (energy consumption per 

dollar value of shipments) will drop at the rate of 0.4 percent per year. Natural gas consumption 

is expected to grow by 8 percent over the period, with consumption of all other fuel inputs 

declining: petroleum by 13 percent, purchased electricity by 8 percent, and coal by 2 percent. 

As mentioned previously, the CEF and AEO 2006 projections do not include the two subsectors 

of the chemicals industry that currently participate in EPA’s Sector Strategies Program—paint 

and coatings, and specialty-batch chemicals. In general, we would anticipate that increasing 

economic production trends in these subsectors will drive a greater energy consumption 

increase than is expected for the bulk chemicals subsector. For example, AEO 2006 projects 

that bulk chemicals’ value of shipments will grow 9 percent from 2004 to 2020, where the value 

of shipments for all other segments of the chemical manufacturing industry will grow by 45 

percent. 

Environmental Implications 

Figure 10: Chemical sector: energy-related CAP emissions 

Chemicals Sector: 

NEI CAP Emissions 

(Total: 1.5 million tons) 

EnergyA related ll other* 

52% 48%

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Chemicals Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 739,000 tons) 

CO 

29% 

NH3 

1% NOX 

30% 

PM10 

1% 

SO2 

37% 

VOC 

2% 

Source: Draft 2002 NEI 

Figure 10 compares NEI data on energyrelated CAP emissions with non-energy- Effects of Energy-Related CAP Emissions 

related CAP emissions for the chemicals SO2 and NOx emissions contribute to respiratory illness 

sector. According to the figure, energy- and may cause lung damage. Emissions also 

related CAP emissions comprise contribute to acid rain, ground-level ozone, and 

approximately half of all CAP emissions. reduced visibility. 

Although NEI data attribute emissions from 

electric power generation to the generating 

source rather than the purchasing entity, purchased electricity comprises a relatively small 

fraction of total energy use for the chemicals industry, so NEI data provide a relatively complete 

picture of the sector’s energy-related CAP emissions. Energy-related CAP emissions are split 

fairly evenly between sulfur dioxide and nitrogen oxides. (As noted in Section 2.3.3, NEI data on 

carbon monoxide emissions appear higher than would be expected for stationary sources, so 

we do not address carbon monoxide data in our assessment of CAP emissions for each sector.) 

U.S. Environmental Protection Agency 3-25 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

Figure 11: Chemical sector: CAP emissions by source category and fuel usage 

Chemicals Sector: 

Energy-Related CAP Emissions by Source 

(Total: 739,000 tons) 

External 

Combustion 

Boilers 

61% 

Internal 

Combustion 

Engines 

6% 

Industrial 

Processes 

33% 

Other 

<1% 

Source: Draft 2002 NEI 

Chemicals Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 739,000 tons) 

Coal 

37% 

Natural Gas 

26% 

All Others 

<1% 

UNK 

22% 

LPG 

<1% 

Residual Oil 

4% 

Source: Draft 2002 NEI 

Figure 11 presents NEI data on the sources of energy-related CAP emissions. According to 

NEI, 37 percent of the energy-related emissions shown in Figure 11 are from coal consumption, 

26 percent are from natural gas, and 22 percent are from unknown sources. Most of the sector’s 

sulfur dioxide emissions stem from coal combustion, while nitrogen oxide emissions result from 

combustion of all fuel types. As coal comprises 37 percent of energy-related CAP emissions but 

less than 10 percent total fuel inputs for the chemical industry (see Table 26), NEI data 

demonstrate the emissions intensity of coal as an energy source. 

Though the largest fraction of energy-related CAP emissions are classified as stemming from 

external combustion boilers according to NEI, emissions that are classified as “process-related” 

are also substantial. NEI data classifications are problematic due to reporting inconsistencies, 

as discussed previously. According to DOE, process heating and cooling systems represent 

over 75 percent of the chemical manufacturing sector’s energy consumption, including fired 

systems such as furnaces and reboilers, steam systems, and cryogenic or other cooling units.100 

Though AEO 2006 projects a decline in energy consumption for the bulk chemicals subsector 

that would reduce energy-related CAP emissions at the facility and to a smaller extent at the 

utility level (from reductions in purchased electric power), we have previously noted that such 

projections are unlikely to be applicable to all subsectors of the chemical manufacturing 

industry, particularly sectors with faster-growing production like specialty-batch chemicals. In 

these subsectors, increasing production is expected to dominate the energy consumption trend, 

leading to increasing energy-related CAP emissions, primarily at the facility level. However, as 

no fuel mix changes are expected for the industry, less emissions-intensive fuels will continue to 

dominate consumption. 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 343 million metric tons in 2004. For the bulk chemicals 

subsector, carbon dioxide emissions are projected to fall by 2 percent by 2020. As is the case 

for energy-related CAP emissions, these projections may not correlate with trends in fastergrowing subsectors of the chemical manufacturing industry. 

U.S. Environmental Protection Agency 3-26 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

3.3.2 Best Case Scenario 

Opportunities 

Table 28 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 28: Opportunity assessment for the chemical manufacturing industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Medium Coal represents a relatively small fraction of the sector’s energy consumption, but it is an 

emissions-intensive energy source (as seen in NEI data). Though MECS data indicate that 

natural gas is the most viable substitute for coal use, natural gas price trends are unlikely 

to make this an attractive opportunity for the industry. 

A substantial fraction of the sector’s energy needs are currently met by waste and 

byproduct fuels, and there are likely opportunities to increase use of alternate and waste 

fuels without compromising environmental quality (for example, in cases where using 

waste fuels for energy content reduces total energy consumption by combining energy 

generation and waste disposal processes). However, hazardous waste permitting 

requirements (for example, under RCRA Subtitle C) may inhibit energy recovery from 

waste fuels. 

Increased CHP High The chemicals industry meets a substantial portion of its electricity demand through onsite 

power generation, primarily via cogenerating units that also produce steam. DOE notes 

that particularly for organic chemical manufacturing, waste heat reduction and increased 

waste heat recovery (including the use of waste energy streams in cogeneration) 

represents a major opportunity for reducing energy losses.101 

New CHP installations also face barriers in terms of utility rates and interconnection 

requirements if electricity production is expected to exceed onsite demand, and also from 

NSR/PSD permitting.102 

Equipment retrofit/ 

replacement 

Medium DOE notes that due to the substantial energy requirements for process heating, major 

energy efficiency gains are achievable through retrofitting or replacing steam system 

equipment (i.e., boilers, pipes, valves, traps, heat exchangers, and preheaters).103 The 

American Council for an Energy Efficient Economy (ACEEE) noted that opportunities exist 

to reduce water usage and increase energy efficiency by installing more efficient water 

treatment technologies.104 

The primary barriers to equipment changes are capital constraints, particularly in 

segments of the industry that are hardest-hit by rising energy costs. 

Process 

improvement 

Medium Process optimization (e.g., waste reduction and improving process yields) is already 

widely practiced in the industry and likely has additional potential. Process improvement 

(i.e., using an alternative process or path to produce the same product) may require 

technological advances or a breakthrough in a new production process, and some areas 

of R&D offer potential for process improvement, such as catalysis as discussed below. For 

example, it is estimated that membrane separation in place of separation by distillation 

may save up to 40 percent of current energy requirements for separation of olefin/paraffin 

mixtures by 2020.

105 

There are likely differences in the viability of process-related opportunities between bulk 

and batch chemical manufacturing, as batch production processes are typically prescribed 

by customer requirements. It may also be more difficult to make improvements on 

continually changing process lines. 

U.S. Environmental Protection Agency 3-27 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

Opportunity Ranking Assessment (including potential barriers) 

R&D Medium The chemical sector has developed mission statements and roadmaps for crucial R&D 

priority efforts as part of its efforts with DOE/IOF; see 

http://www.eere.energy.gov/industry/chemicals/. Energy-savings opportunities that 

continue to be areas for industry research include membrane separation technologies; 

improved process control systems, including adjustments to control flooding in distillation 

columns; and process improvement through catalysis, which lowers the heat input 

necessary to convert reactant species into products. 

The sector also promotes research and funding into coal gasification due to its interest in 

developing less expensive feedstock and fuel alternatives to natural gas. Gasification is 

the first step in some coal-to-liquids (CTL) processes used to produce synthetic fuels 

(syngas) from coal. Some of this fuel can be used as feedstock for chemical products, and 

some can be used to power gas turbines, generating electricity and thermal energy with 

substantially lower SOx, NOx, and particulate emissions than coal. 

Optimal Future Trends 

CEF’s advanced energy scenario projects a 3.5 percent decrease in sector energy consumption 

by 2020, compared with the 13 percent increase projected under the business-as-usual 

scenario. As CEF does not assume any difference in the economic growth rate between the 

base case and advanced case scenarios, the projected decrease in overall energy consumption 

under the advanced scenario is driven by substantial increases in energy efficiency. According 

to CEF, cogeneration is expected to play an important role in increasing energy efficiency in the 

chemicals sector. Currently, 51 percent of natural gas inputs for boiler fuel are consumed in 

CHP/cogeneration processes and 49 percent are consumed in conventional boilers.106 An 

optimal energy scenario increases the magnitude of the CHP fraction at the expense of the 

conventional boiler fraction, boosting energy efficiency. Increased CHP would also reduce 

purchased electricity consumption, as is evident from the decline in the purchased electricity 

category projected under CEF’s advanced energy scenario. 

Other energy efficiency improvements affecting CEF’s advanced case projections include the 

following: increased boiler efficiency; steam system retrofits such as steam trap monitoring and 

maintenance, insulation and condensate recovery; reduced electricity consumption through 

installation of energy-efficient motors, drives, fans, and compressors; and increased commercial 

building efficiency. (Appendix A-2 of the CEF report contains detailed descriptions of CEF’s 

adjustment to the NEMS model in terms of expected rates of efficiency improvement for existing 

equipment and implementation of new energy-efficient technologies under the advanced 

scenario.) 

The CEF advanced scenario summarized in Table 29 projects a cleaner fuel mix by 2020, with 

natural gas meeting a greater share of the sector’s energy demand, and petroleum, coal, and 

purchased electricity meeting a relatively smaller share. Consumption of all fuel types except 

natural gas is expected to decline; natural gas usage is projected to increase by 18 percent from 

1997 to 2020, compared with a 9 percent increase under the base case scenario. As discussed 

previously, increases in natural gas prices that have occurred since the CEF projections were 

made call into question whether such outcomes could realistically be achieved. 

U.S. Environmental Protection Agency 3-28 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

Table 29: CEF advanced case projections for the chemicals industry 

1997 Advanced Case 2020 Advanced Case 

Consumption 

(quadrillion Btu) ppp 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.479 14% 0.206 6% 

Natural gas 2.204 63% 2.611 77% 

Coal 0.176 5% 0.080 2% 

Delivered electricity 0.639 18% 0.478 14% 

Total 3.498 100% 3.375 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -1.2% 

Overall % change in energy use (1997-2020) -3.5% 

Environmental Implications 

At the facility level, CEF’s advanced case projections indicate a moderate improvement in 

energy-related CAP emissions under the advanced scenario through reduction in coal use. 

However, petroleum use remains relatively unchanged and natural gas use increases. The 

reduction in purchased electricity would affect energy-related emissions at the utility level. 

Emissions reductions associated with electric power generation would vary according to the 

energy inputs employed by local power producers. 

Under the advanced energy scenario, environmental benefits come from reduced emissions 

due to the overall reduction in sector energy usage from 1997 levels. Under the advanced 

energy scenario, CEF projects the chemicals industry to achieve a 24 percent reduction in 1997 

carbon emissions levels by 2020. As seen with other CEF projections, reductions in the carbon 

intensity of energy use are achieved both at the sector level through energy efficiency 

improvement—for the chemicals sector, CHP will be a key driver of this trend—reductions in 

emissions-intensive energy sources such as coal, and also through a cleaner fuel mix in offsite 

electric power generation. 

3.3.3 Other Reference Materials Consulted 

3M. 2006. Improving Energy Efficiency. Internet source. Accessed 1 March 2006. Available at 

http://solutions.3m.com/wps/portal/!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Q9KzYsPDdaP0I8yizeINzRx1C_IcFQEAGb_BG4 

!. 

American Chemistry Council. Guide to the Business of Chemistry. 2002. 

American Chemistry Council. Testimony before the Energy and Mineral Resources Subcommittee on the Impact of High Energy 

Costs on Consumers and Public. May 19, 2005. Available at 

http://www.americanchemistry.com/s_acc/bin.asp?SID=1&DID=807&CID=206&VID=109&DOC=File.PDF#search='American%20 

Chemistry%20Council%20number%20of%20facilities%20over%20time. 

American Council for an Energy-Efficient Economy. The Integrated Approach: Case Studies. Internet source. Accessed 1 March, 

2006. Available at http://aceee.org/p2/p2cases.htm#sandia. 

ppp As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel 

consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF 

analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as 

compared with the reference case. 

U.S. Environmental Protection Agency 3-29 March 2007 
Sector Energy Scenarios: Chemical Manufacturing 

Dow Chemical Company. Energy Efficiency and Conservation Efforts. Internet source. Accessed 1 March, 2006. 

Dow Chemical Company. 2006. Increase Resource Productivity. Internet source. Accessed 1 March, 2006. 

Gerard, Jack., American Chemistry Council. Testimony Before the Subcommittee on Energy & Mineral Resources, United States 

House of Representatives, Legislative Hearing on the “Outer Continental Shelf Natural Gas Relief Act.” Available at 

http://www.americanchemistry.com/s_acc/bin.asp?CID=311&DID=1773&DOC=FILE.PDF. 

Kelly, C., Hulse, L., and Wolfe, J. American Chemistry Council. Comments of the American Chemistry Council on the Revisions 

to the Definition of Solid Waste: Proposed Rule 68 Fed. Reg. 61558. October 28, 2003. Available at 

http://www.americanchemistry.com/s_acc/bin.asp?CID=414&DID=1451&DOC=FILE.PDF. 

Khrushch, M., Worrel, E., Price, L., Martin, N., and Einstein, D. Ernest Orlando Lawrence Berkeley National Laboratory. Carbon 

Emissions Reduction Potential in the U.S. Chemicals and Pulp and Paper Industries by Applying CHP Technologies. LBNL43739. 1999. 

U.S. Department of Energy. Chemicals Project Fact Sheet: Distillation Column Flooding Predictor. Available at 

http://www.eere.energy.gov/industry/chemicals/pdfs/dzyacky.pdf. 

U.S. Department of Energy. 2006. Chemicals Project Fact Sheet: Distillation Column Modeling Tools. Available at 

http://www.eere.energy.gov/industry/chemicals/pdfs/distillation.pdf. 

U.S. Department of Energy. Separation of Olefin/Paraffin Mixtures With Carrier-Facilitated Transport Membranes. Available at 

http://www.eere.energy.gov/industry/chemicals/pdfs/olefin_mixtures.pdf. 

U.S. Department of Energy. Energy and Environmental Profile of the U.S. Chemical Industry. 2000. Available at 

http://www.eere.energy.gov/industry/chemicals/pdfs/profile_chap1.pdf. 

U.S. Department of Labor, Bureau of Labor Statistics. Bulletin 2541, Chemical Manufacturing, Except Pharmaceutical and 

Medicine Manufacturing. Internet source. Available at 

http://www.umsl.edu/services/govdocs/ooh20042005/www.bls.gov/OCO/cg/print/cgs008.htm. 

U.S. Environmental Protection Agency. New Source Review: Report to the President. 2002. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency 3-30 March 2007 
Sector Energy Scenarios: Food Manufacturing 

3.4 Food Manufacturing Recent Sector Trends Informing the Base Case 

3.4.1 Base Case Scenario Value of shipments: ↑

Situation Assessment 

Major fuel sources: Natural gas, electricity, coal 

Food manufacturing (NAICS 311) is a multi- Current economic and energy consumption data are billion dollar industry that transforms livestock summarized in Table 30 on page 3-32. and agricultural products into a diverse set of 

products for intermediate or final consumption 

by humans (or by animals as animal feed). Within the NAICS, industry subsectors are 

distinguished by the raw materials (generally of animal or vegetable origin) they process into 

food products. The industry is highly diversified and dominated by large-scale, capital-intensive 

firms, with more than 26,000 facilities across the United States.107 Agribusiness participates in 

EPA’s Sector Strategies Program. 

From 1997 to 2004 the food manufacturing sector showed economic growth in terms of value 

added and total value of shipments (see Table 30). Much of the industry’s energy consumption 

takes place in the East North Central and West North Central regions.108 

While the food-processing sector is typically amongst the largest manufacturing energy 

consumers in states where the industry is located, and has the fifth-highest energy consumption 

of the sectors considered in this analysis, its energy intensity is relatively low (see Table 16). 

Still, energy is an important input cost for the industry, typically ranking third along with capital in 

terms of business costs; raw materials and labor are the dominant cost factors. 

For food manufacturing, the most important fuels are natural gas, purchased electricity, and 

coal.109 According to DOE, approximately 9 percent of the industry’s electricity demand is met 

with onsite power systems, with the majority of that electricity (95 percent) produced in 

cogenerating units that also produce steam.110 

The following eight subsectors consume approximately half of the total energy used by the food 

manufacturing industry: wet corn milling; beet sugar; soybean oil mills; malt beverages; meat 

packing; canned fruits and vegetables; frozen fruits and vegetables; and bread, cake, and 

related goods. It is estimated that 40 percent of the value of processed food is added through 

energy-intensive manufacturing. Process heating and cooling systems (steam systems, ovens, 

furnaces, and refrigeration units) have the greatest energy requirements in food manufacturing 

(over 75 percent of the sector’s energy use) and are necessary to maintain food safety. Motordriven systems (pumps, fans, conveyors, mixers, grinders, and other process equipment) 

represent 12 percent of the sector’s energy use, and facility functions (heat, ventilation, lighting, 

etc.) comprise approximately 8 percent.111 The sector also has the largest transportation 

demand of the sectors considered in this analysis, comprising more than 20 percent of the 

manufactured commodity shipping ton-miles recorded by DOT in 2002 (see Table 11).112 

Recent fuel consumption trends (1998 to 2002) show increased coal usage, which may indicate 

that some companies are increasing coal consumption in response to increases in the price of 

natural gas.113 (For a detailed discussion of fuel-switching and the limitations thereof, please see 

Section 2.2.3.) Rising energy costs are a motivator for increased energy efficiency in the food 

manufacturing industry. Energy ranks third among input costs, behind raw materials and labor, 

but is often viewed as a fixed cost. The industry may have substantial potential for energy 

efficiency improvement, as historically it has not taken a strategic approach to energy 

management, and firms often lack awareness of energy efficiency opportunities. Moreover, the 

margins in the food manufacturing industry are relatively thin compared to other manufacturing 

U.S. Environmental Protection Agency 3-31 March 2007 
Sector Energy Scenarios: Food Manufacturing 

and processing industries; thus, the sector may be typically slower to adopt technologies and 

processes that require significant capital outlays. 

To provide more information to the sector, a Food Industry Resource Efficiency team (FIRE) 

developed an energy portal for food processors through the State Technologies Advancement 

Collaborative (STAC) program, administered by the National Association of State Energy 

Officials for DOE. Other organizations, such as Efficiency Vermont and the Northwest Alliance, 

work toward assisting specific commodity processors in their regions with improving energy 

efficiency. This regional approach recognizes that food production and processing tends to be 

geographically distinctive: wine processing in northern California, dairy in Wisconsin, and so 

forth. 

Table 30 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 30: Current economic and energy data for the food manufacturing industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

2.5% 2.5% 0.8% 1.8% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

6.0 2.6 3.3% 1.5% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Natural Gas Net Electricity Coal Otherqqq Fuel Oil 

52% 21% 17% 8% 3% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 28% 

Fuel Oil LPG Electricity 

Fraction of natural gas inputs that could be 

met by alternate fuels 

71% 41% 13% 

Fuel-Switching Potential in 2002: Coal to Alternate Fuels 

Switchable fraction of coal inputs 20% 

Natural Gas LPG Fuel Oil 

Fraction of coal inputs that could be met by 

alternate fuels 

83% 19% 13% 

qqq “Other” fuels include waste materials used as fuel. 

U.S. Environmental Protection Agency 3-32 March 2007 
Sector Energy Scenarios: Food Manufacturing 

Expected Future Trends 

In the United States, increasing demand for fresh processed foods by individual consumers and 

by HRI (hotel, restaurant, institutional) customers has increased energy consumption by the 

food manufacturing industry. Demographically, the increase in two-earner couples, increased 

disposable income, and an aging population are all pushing the system to deliver more readyto-eat or fast-prepared foods. Additionally, if the next wave of food consumption entails more 

fresh foods, particularly more fruits and vegetables, energy utilization may increase, since 

reducing spoilage will require even more sophisticated and possible lengthy supply chains, coldchain accuracy, hot house expansions, etc. AGF projects continued economic growth for the 

food manufacturing industry through 2020 due to increases in population and disposable 

income, and the fact that foreign competition is less of a limiting factor than it is for other 

industries.114 

Under its reference scenario, CEF projects that energy consumption by the food manufacturing 

sector will increase by 19 percent from 1997 to 2020, primarily driven by continued economic 

growth in the sector (the value of industry output is assumed to increase at the rate of 1.2 

percent per year). Energy intensity (energy consumption per dollar value of output) is expected 

to decrease at the slow rate of 0.5 percent per year. Consumption of all fuel types is projected to 

increase. No large-scale changes in the sector’s fuel mix are projected, though the projected 

minor shift from natural gas to petroleum may be unlikely given the increases in the price of oil 

that have occurred since the CEF study was published. The sector will continue to remain 

dependent on natural gas. Supporting CEF projections, AGF predicts that overall natural gas 

consumption by the food manufacturing industry will increase at 0.4 percent annually through 

2020.115 

Table 31 summarizes the CEF base case projection for the food manufacturing sector. The 

small renewables fraction is primarily attributable to the use of bio-waste as fuel. 

Table 31: CEF reference case projections for the food manufacturing industry 

1997 Reference Case 2020 Reference Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.209 17% 0.272 18% 

Natural gas 0.625 50% 0.701 48% 

Coal 0.183 15% 0.228 15% 

Renewables 0.014 1% 0.020 1% 

Delivered electricity 0.208 17% 0.251 17% 

Total 1.239 100% 1.472 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -0.5% 

Overall % change in energy use (1997-2020) 19% 

In an effort to assess the impact of recent trends that may have affected industry energy 

consumption since the CEF report was produced, we also examined reference case energy 

consumption projections for the food manufacturing sector produced in connection with EIA’s 

Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS model but incorporates 

more recent energy and economic data. 

U.S. Environmental Protection Agency 3-33 March 2007 
Sector Energy Scenarios: Food Manufacturing 

AEO 2006 projects faster growth in the industry’s value of shipments than CEF (2 percent per 

year) and a similar rate of decrease in energy intensity (0.6 percent per year). Overall, AEO 

2006 projects that sector energy consumption will increase 24 percent from 2004 levels by 

2020. The industry’s energy needs will continue to be met by natural gas (54 percent of total 

energy inputs in 2020), purchased electricity (22 percent), and coal (17 percent). Consumption 

of all fuels is projected to increase, with the exception of petroleum, which is expected to decline 

by 6 percent over the period. The largest percentage increases in fuel consumption are for 

renewables (43 percent increase from 2004 to 2020), natural gas (30 percent increase), and 

purchased electricity (24 percent increase). 

Environmental Implications 

Figure 12: Food manufacturing sector: energy-related CAP emissions 

Food Processing Sector: 

NEI CAP Emissions 

(Total: 395,000 tons) 

Energyrelated 

63% 

All other* 

37% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Food Processing Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 248,000 tons) 

CO 

29% PM10 

3% 

SO2 

37% 

NOX 

29% 

NH3 

<1% 

VOC 

2% 

Source: Draft 2002 NEI 

Figure 12 compares NEI data on energy-related 

CAP emissions with non-energy-related CAP Effects of Energy-Related CAP Emissions 

emissions for the food manufacturing sector. SO2 and NOx emissions contribute to respiratory illness 

According to the figure, energy-related CAP and may cause lung damage. Emissions also 

emissions comprise a relatively large fraction of contribute to acid rain, ground-level ozone, and 

total CAP emissions, in part due to the sector’s reduced visibility. 

substantial process heating and cooling 

requirements. According to MECS data (see Table 30), purchased electricity (net) meets 

roughly 20 percent of the sector’s energy needs. As NEI data attribute emissions associated 

with electric power generation to the generating source rather than the purchasing entity, there 

are substantial energy-related CAP emissions that are not represented in NEI data for this 

sector. 

U.S. Environmental Protection Agency 3-34 March 2007 
Sector Energy Scenarios: Food Manufacturing 

Figure 13: Food manufacturing sector: CAP emissions by source category and fuel usage 

Food Processing Sector: 

Energy-Related CAP Emissions by Source 

(Total: 248,000 tons) 

External 

Combustion 

Boilers 

94% 

Industrial 

Processes 

3% 

Other 

<1% 

Internal 

Combustion 

Engines 

3% 

Stationary 

Source Fuel 

Combustion 

<1% 

Source: Draft 2002 NEI 

Food Processing Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 248,000 tons) 

Coal 

52% Natural Gas 

19% 

Distillate Oil 

2% 

Residual Oil 

5% 

All Others 

3% 

Biomass 

19% 

Source: Draft 2002 NEI 

Figure 13 presents NEI data on the sources of energy-related CAP emissions shown in Figure 

12. NEI data classify the majority of energy-related CAP emissions as produced by external 

combustion boilers. As noted previously, NEI data classifications are problematic due to 

reporting inconsistencies, but equipment classified under “external combustion boilers” likely 

includes steam systems used for process heating. Segments of the food manufacturing industry 

with high boiler usage include sugar, malt beverages, corn milling, and meat packing. As noted 

previously, more than 75 percent of the sector’s energy requirements are for process heating 

and cooling systems, which, according to DOE classifications include steam systems, fired 

systems, and cooling units. Motor-driven systems are another substantial end use of energy116 

but are primarily electric so associated emissions would not be captured in NEI. 

According to NEI data shown in Figure 14, 52 percent of the sector’s energy-related CAP 

emissions are from coal consumption, and 19 percent are from natural gas consumption. The 

emissions intensity of coal is evident from this figure, as MECS data (see Table 30) report that 

coal comprises approximately 16 percent of the sector’s energy inputs compared with more than 

50 percent for natural gas. Sulfur dioxide and nitrogen oxides (both linked to coal combustion), 

are fairly equal contributors to energy-related CAP emissions for the food manufacturing 

industry. (As noted in Section 2.3.3, NEI data on carbon monoxide emissions appear higher 

than would be expected for stationary sources, so we do not address carbon monoxide data in 

our assessment of CAP emissions for each sector.) Given AEO 2006 and CEF reference case 

projections of increasing energy consumption through 2020, energy-related CAP emissions are 

expected to increase as well, with the majority of energy-related CAP emissions continuing to 

occur at the facility level. 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 92 million metric tons for the food manufacturing sector 

in 2004. AEO 2006 projects that the industry’s carbon dioxide emissions will increase 19 

percent from 2004 to 2020—a somewhat smaller increase than the projected growth in energy 

consumption (24 percent). Though we do not address transportation energy use in detail in this 

analysis, the sector also has extensive freight shipping needs. 

U.S. Environmental Protection Agency 3-35 March 2007 
Sector Energy Scenarios: Food Manufacturing 

3.4.2 Best Case Scenario 

Opportunities 

Table 32 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 32: Opportunity assessment for the food manufacturing industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Medium There is potential for increased switching to waste fuels (such as used vegetable oil 

that can be reused as boiler fuel) and reduced use of coal as boiler fuel. Limitations on 

this opportunity are imposed by technical constraints (type of boiler and burners in 

place) and economic constraints (relative price of coal versus less emissions-intensive 

fuels). Permitting considerations (NSR/PSD) may also affect fuel-switching. 

Increased CHP High CEF cites increased cogeneration as the greatest energy efficiency opportunity for the 

sector. One area of opportunity is increased use of waste heat (e.g., using boiler flue 

gases in CHP processes,117 or from refrigeration processes, where heat from engines 

used to drive compressors can be used to preheat water or for space heating at the 

plant). 

New CHP installations also face barriers in terms of utility rates and interconnection 

requirements if electricity production is expected to exceed onsite demand, and also 

from NSR/PSD permitting.118 

Equipment retrofit/ 

replacement 

Medium Energy efficiency gains are achievable through retrofits or replacement of existing 

equipment with more efficient new models, particularly in steam systems since these 

systems have the largest energy requirements and associated energy losses. 

Equipment-related opportunities noted by DOE include replacing steam systems with 

direct-fired drying equipment (impulse drying, infrared drying, and press drying).119 

Other areas for steam system retrofits or equipment replacement include boilers, 

pipes, valves, traps, heat exchangers, and preheaters. 

Process 

improvement 

High Process improvement opportunities include changes in operating techniques to 

implement best energy management practices, optimizing energy consumption in 

scheduling processing activities, wastewater reuse, and conversion and/or sale of 

byproducts. For example, while dehydration systems were originally designed for 

maximum product throughput, newer systems include recirculating dampers. 

ACEEE has made several recommendations for the food products industry including 

industry practices such as pasteurization and sterilization by cold pasteurization and 

electron beam sterilization; evaporation and concentration by supercritical extraction 

and protein separation, drying by vapor recompression supercritical extraction; and 

chilling, cooling, and refrigeration by controlled atmosphere packaging. 

In some cases, process changes must be reviewed, certified, and approved by USDA, 

Food and Drug Administration, or other regulatory agencies; the added cost of this 

regulatory review may serve as a barrier to efficiency improvement. 

R&D Medium A recent LBNL study notes that membrane technologies can reduce energy 

requirements associated with traditional filtration, separation, and evaporation 

processes, and also increase byproduct recovery.

120 Advanced cooling and 

refrigeration processes also offer potential energy savings, though it is important to 

note that many larger plants already use ammonia refrigeration systems, which are 

quite efficient and provide the multiple refrigeration temperatures often required in food 

manufacturing plants. In addition to membrane technologies and refrigerants, there is 

also continued research and progress on uses of byproducts, byproduct reduction, 

analytical methods, sanitizing and cleaning agents and procedures, wastewater 

treatment technologies, and packaging technologies. 

U.S. Environmental Protection Agency 3-36 March 2007 
Sector Energy Scenarios: Food Manufacturing 

Optimal Future Trends 

CEF’s advanced energy scenario projects a smaller increase in sector energy consumption (8 

percent from 1997 to 2020) than under the business-as-usual scenario (19 percent increase). 

According to CEF, cogeneration is expected to play an important role in increasing energy 

efficiency in the food manufacturing sector, contributing to a faster decrease in energy intensity 

(decline of 0.9 percent per year) than was projected in the reference case (decline of 0.5 

percent per year). The effects of increased CHP may also be evident through a slight decline in 

purchased electricity (1 percent) in the advanced case, despite the overall trend of increasing 

energy consumption. Over the same period, consumption of natural gas and petroleum is 

expected to increase by 14 percent and 15 percent, respectively, and coal use is expected to 

decline by 16 percent. CEF’s advanced case employs the AEO 1999 HiTech case assumptions 

concerning rates of deployment of energy-efficient equipment, and also assumes increased 

energy efficiency for boilers and commercial buildings. 

CEF’s advanced case projections are summarized in Table 33. 

Table 33: CEF advanced case projections for the food manufacturing industry 

1997 Advanced Case 2020 Advanced Case 

Consumption 

(quadrillion Btu) rrr 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.210 17% 0.242 18% 

Natural gas 0.630 51% 0.718 53% 

Coal 0.184 15% 0.155 12% 

Renewables 0.014 1% 0.022 2% 

Delivered electricity 0.208 17% 0.206 15% 

Total 1.246 100% 1.343 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -0.9% 

Overall % change in energy use (1997-2020) 8% 

Environmental Implications 

Under the advanced energy scenario, CEF projects a smaller increase in sector energy 

consumption than under its reference case, which is a net gain in terms of energy-related CAP 

emissions. The advanced case also predicts a shift from coal to natural gas that does not occur 

under the reference case, which would lead to lower CAP emissions at the facility level than are 

expected under the business-as-usual conditions—particularly sulfur dioxide and nitrogen 

oxides. 

Despite the overall increase in sector energy consumption, under the advanced energy 

scenario, CEF projects the food manufacturing industry to achieve an 11 percent reduction in 

carbon emissions levels by 2020. Projected carbon emissions reductions are attributable to 

efficiency gains from increased CHP and reductions in purchased electricity (which is 

rrr As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel 

consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF 

analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as 

compared with the reference case. 

U.S. Environmental Protection Agency 3-37 March 2007 
Sector Energy Scenarios: Food Manufacturing 

associated with substantial energy losses, as discussed previously), and reductions in the use 

of carbon-intensive energy sources such as coal. However, replacing purchased electricity with 

petroleum and natural gas will also have the effect of shifting energy-related CAP and carbon 

emissions from the utility level to the facility level. The location of carbon emissions is not 

important from a climate perspective. However, energy trends that are environmentally 

preferable from a climate perspective may also lead to less-than-optimal trends for facility 

emissions of criteria air pollutants. 

3.4.3 Other Reference Materials Consulted 

American Council for an Energy-Efficient Economy. Energy Usage in the Food Industry. October 1998. Available at 

http://www.aceee.org/pubs/ie981.htm. 

Northwest Food Processors Association. Efficiency Practices Fact Sheets and Reports. Available at 

http://www.nwfpa.org/eweb/DynamicPage.aspx?site=energy&webcode=lower&wps_key=dab74ed3-b4ba-4b51-96ffe39c311019e2. 

Northwest Food Processors Association. Energy Portal for Food Processors. Available at 

http://www.nwfpa.org/eweb/startpage.aspx?site=Energy&design=no. 

U.S. Department of Energy. Technology Roadmap: Energy Loss Reduction and Recovery in Industrial Energy Systems. 

November 2004. Available at http://www.eere.energy.gov/industry/energy_systems/pdfs/reduction_roadmap.pdf. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency 3-38 March 2007 
Sector Energy Scenarios: Forest Products 

3.5 Forest Products 

Recent Sector Trends Informing the Base Case 3.5.1 Base Case Scenario 

Number of facilities: ↓ Situation Assessment Pulp and paper value of shipments: ↓

Forest products manufacturing (NAICS 321 and Wood products value of shipments: ↑

322) includes companies that grow, harvest, or Energy intensity: ↓

process wood and wood fiber for use in Major fuel sources: Wood biomass, black liquor, products such as paper, lumber, board natural gas, & electricity products, fuels, and many other specialty 

materials. The forest products sector can be Current economic and energy consumption data are 

summarized in Table 34 (pulp & paper) and Table 35 divided into two major categories: (1) pulp, (wood products) beginning on page 3-41. paper, and paperboard products; and (2) 

engineered and traditional wood products. As 

reported by DOE’s Industrial Technologies Program (ITP), there are more than 4,600 pulp and 

paper facilities and 11,600 lumber and wood products facilities,121 typically located near wood 

sources to minimize transportation costs. While the industry has operations in all 50 states, 

Wisconsin, California, and Georgia are the nation’s top three producers of forest products.122

The forest products industry participates in EPA’s Sector Strategies Program. 

From 1997 to 2004 the pulp and paper industry showed a decline in value added and value of 

shipments, and the wood products industry showed slow growth in both metrics (see Table 34 

and Table 35). The primary economic pressure on the U.S. forest products industry is from 

foreign competition, both from its historical competitors such as Canada, Scandinavia, and 

Japan, and from countries with emerging industries such as Brazil, Chile, and Indonesia.123

Over the past 10 years, DOE/ITP reports that many forest product companies have been forced 

to close or idle a large number of mills to reduce costs and remain competitive. 

The forest products sector has several unique energy consumption attributes that distinguish it 

from other manufacturing sectors. More than half of the sector’s energy needs are met with 

renewable biomass fuels that are byproducts of the manufacturing process, and which facilities 

burn in boilers to generate steam and electricity.124 Renewable byproduct fuels are primarily 

spent pulping liquors (chemicals and other burnable substances dissolved from wood in the 

pulping process) and “hogged fuel” (logging and wood processing waste such as bark and other 

wood residuals).125 The forest products industry is the largest user of wood byproduct fuels, 

representing 93 percent of total wood fuel usage by U.S. manufacturing industries.126 According 

to energy data reported by AF&PA in 2002, spent pulping liquors met more than 40 percent of 

pulp and paper manufacturing energy requirements, and wood waste met around 15 percent. 

For wood products manufacturers, wood waste met more than 65 percent of total energy 

requirements.127 (These fractions are slightly higher than MECS’ estimates of “other” fuel use 

fractions for the sectors in 2002, which may in part be attributable to differences in the data 

collection methodologies employed by the two sources.) Trees remove carbon from the 

atmosphere as they grow, and thus from a lifecycle perspective, consumption of wood 

byproduct fuels represents an almost carbon neutral energy source. (There is some energy 

consumption associated with harvesting and transporting biomass, and accounting for such 

energy use means that it is not entirely carbon neutral). At the same time, the forest products 

industry has the third-highest fossil fuel consumption among manufacturing industries,128 so 

further reducing fossil fuel inputs represents both a cost savings and an environmental

improvement opportunity for the sector. 

The other characteristic that distinguishes energy consumption by the forest products industry 

from that of other manufacturing industries is the extent to which combined heat and power 

U.S. Environmental Protection Agency 3-39 March 2007 
Sector Energy Scenarios: Forest Products 

(CHP) applications are used to meet demand for electric and thermal energy. As discussed 

previously, CHP (also referred to as cogeneration) is considered an environmentally preferable 

generating technology because the simultaneous production of thermal and electric energy is 

more efficient than electric-only generating processes, and onsite electricity production 

eliminates the energy losses associated with long-distance transmission and distribution of 

electric power over the grid. The forest products sector is the largest cogenerator among U.S. 

manufacturing industries, with more than 65 of the industry’s electricity needs are being met 

through cogeneration processes.129 Thermal energy (primarily steam) is used for process 

heating, evaporation, and drying, as well as to power equipment such as saws and conveyors. 

Electricity is primarily used to power process equipment.130 

Energy use by the industry is dispersed geographically but is highest in the East North Central, 

West North Central, and West South Central regions. 

131 Pulp and paper manufacturing 

accounted for 86 percent of the energy used in 2002, while wood products manufacturing 

accounted for the remaining 14 percent.132 The majority (81 percent) of the sector’s energy 

requirements are for process heating and cooling systems, particularly those used for drying 

and evaporation.133 

Due to competitive pressures and the energy-intensive nature of its manufacturing processes, 

the forest products industry is highly motivated to control the costs of purchased energy. 

According to DOE, long-term reductions in energy intensity have been achieved primarily 

through process efficiency improvements and addition of CHP capacity.134 To address the 

impact of rising energy costs in the 1990s, the sector made comprehensive energy efficiency 

investments, increased burning of wood waste to produce energy, and reduced petroleum 

inputs in favor of natural gas. From 1998 to 2002, the energy intensity of the wood products 

sector declined by 29 percent, and the energy intensity of the pulp and paper sector declined by 

19 percent.135 Available energy consumption data precede energy price increases that have 

occurred since 2002. AF&PA indicates that further energy intensity reductions have resulted 

from recent energy price increases, primarily through the closure of inefficient mills. Since 2002, 

the industry has sought to control energy costs through increased utilization of waste streams 

for energy content (spent pulping liquors and wood residuals),136 and achieved energy 

consumption reductions through installation of variable speed motors and more energy-efficient 

lighting.137 

Environmental compliance also represents a substantial cost for the industry. DOE reports that 

from 1997 to 2002, 14 percent of annual capital equipment expenditures were dedicated to 

environmental protection measures, at an industry-wide cost of $800 million per year.138 The 

intersection between environmental compliance and energy consumption may involve tradeoffs. For instance, according to AF&PA, natural gas consumption by the wood products industry 

has increased due to environmental regulations that require the installation of regenerative 

thermal oxidizers (RTOs), and the new Plywood MACT is expected to require additional RTO 

installations by 2008.139 

Table 34 and Table 35 summarize current economic trend and energy consumption data 

originally presented in Chapter 2. 

U.S. Environmental Protection Agency 3-40 March 2007 
Sector Energy Scenarios: Forest Products 

Table 34: Current economic and energy data for the pulp and paper industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

-1.2% -3.6% -1.6% -4.0% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

31.1 15.2 8.8% 4.3% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Other (Primarily 

Biomass)sss 

Natural Gas Coal Net Electricity Fuel Oil 

54% 21% 10% 9% 5% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 32% 

Fuel Oil Electricity LPG 

Fraction of natural gas inputs that could be 

met by alternate fuels 

80% 16% 9% 

Fuel-Switching Potential in 2002: Coal to Alternate Fuels 

Switchable fraction of coal inputs 23% 

Fuel Oil Natural Gas Electricity 

Fraction of coal inputs that could be met by 

alternate fuels 

66% 57% 10% 

sss For pulp and paper manufacturing, biomass fuels categorized as “other” fuels in MECS include spent pulping liquor 

(approximately 70% of the “other” category) and wood residues and byproducts (approximately 27% of the “other” 

category). 

U.S. Environmental Protection Agency 3-41 March 2007 
Sector Energy Scenarios: Forest Products 

Table 35: Current economic and energy data for the wood products industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

1.8% 2.5% 0.3% 0.2% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

10.6 4.2 4.7% 1.9% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Other (Primarily 

Biomass)ttt 

Net Electricity Natural Gas Fuel Oil LPG&NGL 

61% 19% 15% 3% 1% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 20% 

Fuel Oil LPG Other 

Fraction of natural gas inputs that could be 

met by alternate fuels 

36% 36% 27% 

Expected Future Trends 

The forest products industry will continue 

to seek to control energy costs in an 

effort to maintain its competitive position 

in the global market, and the industry 

views increased biomass utilization as a 

key tool for achieving that objective. At 

the same time, several factors have the 

potential to increase energy demand: 

• Increased facility energy use 

resulting from stricter pollution 

control requirements and 

increased facility automation. 

• Reductions in timber acreage lead 

to increased harvesting of suboptimal timber that requires more 

energy-intensive processing. 

CEF does not address the wood 

products sector, but since the pulp and 

paper industry has substantially greater 

Voluntary Commitments 

Through Climate VISION, the American Forest & Paper 

Association has committed to reducing the industry’s GHG 

intensity by 12 percent between 2000 and 2012. Specific 

initiatives include improving carbon emissions inventories and 

reporting, enhancing carbon sequestration in managed forests 

and products, and increasing energy efficiency, cogeneration, 

use of renewable energy, and recycling. See 

http://www.climatevision.gov/sectors/forest/index.html. 

The forest products sector also participates in DOE’s Industries 

of the Future (IOF)/Industrial Technologies Program (ITP) as an 

“Energy Intensive Industry.” ITP’s goals for all energy intensive 

sectors include the following: 

 Between 2002 and 2020, contribute to a 30 percent 

decrease in energy intensity. 

 Between 2002 and 2010, commercialize more than 10 

industrial energy efficiency technologies through research, 

development & demonstration (RD&D) partnerships. 

See http://www.eere.energy.gov/industry/forest/. 

ttt For wood products manufacturing, biomass fuels categorized as “other” fuels in MECS are primarily wood waste. 

U.S. Environmental Protection Agency 3-42 March 2007 
Sector Energy Scenarios: Forest Products 

energy requirements, it is appropriate to focus our future scenario assessments on this subset 

of the forest products industry. The pulp and paper industry is also one of the three sectors 

(along with cement and steel) for which CEF made detailed parameter modifications to the 

NEMS model used to produce AEO 1999. Modifications included adjustments to baseline 

energy intensities and rates for annual improvements in energy intensity, which were adjusted 

to reflect best-available sector-specific research. It is important to note that the CEF analysis 

predates the energy price increases of 2004 and 2005 that have shifted the industry towards 

even greater use of biomass as an energy source (spent pulping liquor and wood waste), and 

toward lower energy intensity through the closure of older, less efficient manufacturing facilities. 

Under the reference case scenario, CEF projects that the pulp and paper industry’s energy 

consumption will continue to be dominated by renewable fuels (primarily biomass) and natural 

gas, though renewable energy sources will grow at the expense of natural gas, coal, and 

petroleum as the industry continues to reduce its demand for purchased fuels. Economic energy 

intensity (energy consumption per dollar value of output) is expected to decrease at the rate of 

0.9 percent per year, and physical energy intensity (energy consumption per ton of production) 

is projected to decrease at the annual rate of 0.5 percent per year. Economic production is 

projected to grow at the rate of 1.2 percent per year. 

CEF’s assumptions about production growth in the pulp and paper sector drive the expected 

increase in energy consumption despite the trend of decreasing energy intensity. CEF 

projections are also based on the assumption that Kraft/sulfite pulping will increase from an 83.7 

percent market share in 1994 to an 88.7 percent market share by 2020, with mechanical pulping 

dropping from 9.6 percent to 5.7 percent, and semi-chemical pulping dropping from 6.7 percent 

to 5.6 percent. Energy efficiency improvements embedded in CEF’s reference case projections 

include an anticipated decline in energy consumption for raw materials preparation, an increase 

in heat recovery from mechanical pulping processes, slow penetration of energy-efficient 

grinding technologies, and reduced heat requirements for the papermaking process due to full 

commercialization of the CondeBelt process by 2020. (Appendix A-2 of the CEF report contains 

detailed descriptions of CEF’s adjustment to the NEMS model in terms of expected rates of 

efficiency improvement for existing equipment and implementation of new energy-efficient 

technologies under the business-as-usual scenario.) 

CEF reference case projections are summarized in Table 36. 

Table 36: CEF reference case projections for the pulp and paper industry 

1997 Reference Case 2020 Reference Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.122 4% 0.096 3% 

Natural gas 0.672 23% 0.427 14% 

Coal 0.394 13% 0.269 9% 

Renewables 1.483 51% 1.997 65% 

Delivered electricity 0.258 9% 0.274 9% 

Total 2.929 100% 3.063 100% 

Annual % change in economic energy intensity (energy consumption per dollar value of output) -0.9% 

Overall % change in energy consumption (1997-2020) 5% 

U.S. Environmental Protection Agency 3-43 March 2007 
Sector Energy Scenarios: Forest Products 

CEF’s assumption of increasing economic production may be inconsistent with current industry 

realities given that key economic indicators for the industry—value added and value of 

shipments—have declined since 1997 (-1.2 percent per year and -1.6 percent per year, 

respectively). If economic production remains flat or declines further, sector energy consumption 

would be expected to decrease given expected energy efficiency improvements. 

In an effort to assess the impact of recent trends that may have affected industry energy 

consumption since the CEF report was produced, we also examined reference case energy 

consumption projections for the pulp and paper industry produced in connection with EIA’s 

Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS model but incorporates 

more recent energy and economic data. However, AEO 2006 also projects production to grow 

(increasing at 1.1 percent per year), albeit at a slightly slower rate than projected by CEF, which 

drives an expected increase in energy consumption of 12 percent over the period. AEO 2006 

projects a decrease in energy intensity of 0.5 percent per year. Consumption of renewable fuels 

is expected to grow by 20 percent over the period, meeting the majority of the sector’s energy 

consumption increase. Petroleum consumption is projected to decline, and coal consumption is 

projected to remain static. CEF and AEO projections of increased reliance on renewable 

biomass fuels are in line with AF&PA expectations, though according to AF&PA data, the pulp 

and paper industry already meets 60 percent of its energy needs with biomass.140 

Continued energy pricing pressures are expected to drive increased utilization of biomass 

resources as an energy source. At the same time, increased yield and process efficiency 

reduces the availability of biomass byproducts for energy consumption purposes.141 The 

industry is also concerned about increasing demand for biomass that would drive up the cost of 

the industry’s raw material, in part due to government policies that broadly encourage the use of 

biomass as fuel—for instance, by renewable power generators.142 

Environmental Implications 

Figure 14: Forest products sector: energy-related CAP emissions 

Pulp & Paper Sector: 

NEI CAP Emissions 

(Total: 1.2 million tons) 

Energyrelated 

61% 

All other* 

39% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Pulp & Paper Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 721,000 tons) 

VOC 

3% CO 

27% 

SO2 

42% NH3 

<1% 

NOX PM10 26% 2% Source: Draft 2002 NEI 

U.S. Environmental Protection Agency 3-44 March 2007 
Sector Energy Scenarios: Forest Products 

Wood Products Sector: Wood Products Sector: 

NEI CAP Emissions Energy-Related CAP Emissions by Pollutant 

(Total: 515,000 tons) (Total: 408,000 tons) 

All other* SO2 VOC CO 

21% PM10 1% 9% 25% 

4% 

NOX Energy- 6% related

79%

Source: Draft 2002 NEI NH3 

* Includes emissions from unspecified sources; may include 55% 

additional energy-related emissions. Source: Draft 2002 NEI 

Figure 14 compares NEI data on energy-related CAP emissions with non-energy-related CAP 

emissions for the two subsectors of the forest products industry: pulp and paper, and wood 

products. The forest products sector’s fraction of 

energy-related CAP emissions (as a percentage Effects of Energy-Related CAP Emissions 

of total CAP emissions) is higher than that of 

many other sectors included in this analysis. This SO2 and NOx emissions contribute to respiratory illness 

is in large part due to the extent to which the and may cause lung damage. Emissions also 

contribute to acid rain, ground-level ozone, and sector meets its own electric and thermal energy reduced visibility. requirements through onsite power generation, 

with extensive use of relatively more energyefficient CHP applications. (As discussed previously, onsite power generation also reduces the 

magnitude of energy losses that occur in power transmission and distribution.) Substantial 

process heating requirements in both sectors also contribute to the magnitude of the energyrelated CAP fraction. 

The substantial fraction of ammonia (NH3) emissions shown for the wood products industry is 

the result of an NEI data reporting error: 225,000 TPY of ammonia emissions reported in NEI 

are from a single facility and are believed to be incorrectly reported or misclassified as energy 

related. After correcting for this error by eliminating that data point, total energy-related CAP 

emissions for the wood products industry are approximately 180,000 TPY (as reported in Table 

13, Section 2.3.3), and the largest fractions of energy-related CAP emissions are carbon 

monoxide (55 percent), VOCs (19 percent), and nitrogen oxides (14 percent). (As noted in 

Section 2.3.3, NEI data on carbon monoxide emissions appear higher than would be expected 

for stationary sources.) 

Though the fraction of energy-related CAP emissions for the wood products sector is larger than 

the energy-related fraction for pulp and paper, due to the greater energy requirements of the 

pulp and paper industry, on a ton-basis energy-related CAP emissions are much larger for the 

pulp and paper sector than they are for wood products sector. According to MECS data (see 

Table 35), in 2002 purchased electricity met nearly 20 percent of the wood products sector’s 

energy requirements, indicating that a substantial fraction of the sector’s energy-related 

emissions are not captured by NEI data for the sector (as such emissions are attributed to the 

generating source rather than the purchasing entity). For pulp and paper, net electricity met 

approximately 9 percent of the sector’s energy demand in 2002. 

U.S. Environmental Protection Agency 3-45 March 2007 
Sector Energy Scenarios: Forest Products 

Figure 15: Forest products sector: CAP emissions by source category and fuel usage 

Pulp & Paper Sector: 

Energy-Related CAP Emissions by Source 

(Total: 721,000 tons) 

External 

Combustion 

Boilers 

95% 

Other 

<1% 

Internal 

Combustion 

Engines 

1% 

Industrial 

Processes 

4% 

Source: Draft 2002 NEI 

Pulp & Paper Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 721,000 tons) 

Coal 

43% 

Residual Oil 

11% Petroleum 

Coke 

1% 

Wood/Bark 

Waste 

26% 

Natural Gas 

14% 

All Others 

5% 

Source: Draft 2002 NEI 

Wood Products Sector: 

Energy-Related CAP Emissions by Source 

(Total: 408,000 tons) 

External 

Combustion 

Boilers 

88% 

Industrial 

Processes 

12% 

Internal 

Combustion 

Engines 

<1% Petroleum 

and Solvent 

Evaporation 

Sou <1% rce: Draft 2002 NEI 

Wood Products Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 408,000 tons) 

UNK 

Wood/Bark 

Waste 

90% 

(Plyw ood 

Operations) 

6% 

Natural Gas 

2% 

All Others 

1% 

Steam 

1% 

Coal 

<1% 

Source: Draft 2002 NEI 

Figure 15 presents NEI data on the sources of energy-related CAP emissions shown in Figure 

14. For both sectors, most energy-related emissions are classified as stemming from external 

combustion boilers. NEI data classifications are problematic due to reporting inconsistencies, as 

discussed previously. According to DOE data for the pulp and paper industry, process heating 

and cooling systems represent 81 percent of the sector’s energy use, with drying and 

evaporation processes requiring substantial energy inputs. “External combustion boilers” 

includes steam systems reboilers. Direct-fired systems such as furnaces are likely included 

under “industrial processes.” Motor-driven systems comprise 13 percent of the sector’s end use 

of energy, which includes pumps, conveyors, compressors, fans, mixers, grinders, and other 

process equipment,143 but are primarily electric powered so would not be represented in NEI 

data. 

Although MECS data report that coal supplied only 10 percent of the pulp and paper industry’s 

energy requirements in 2002, NEI data show coal as contributing to 43 percent of the sector’s 

energy-related CAP emissions. As MECS reports more than 50 percent of the sector’s energy 

coming from “other” fuels (which includes biomass), NEI data show that biomass (wood waste) 

is a less emissions-intensive energy source than coal. For wood products, combustion of 

wood/bark waste is the dominant energy-related source of CAP emissions. 

The trend of increased renewable energy (biomass) consumption and decreased coal 

consumption projected by CEF and AEO 2006 under a business-as-usual scenario is likely to 

improve the CAP emissions profile for the pulp and paper industry. The effect of increased fuel 

usage of biomass on CAP emissions would also be likely to vary from site to site, depending on 

U.S. Environmental Protection Agency 3-46 March 2007 
Sector Energy Scenarios: Forest Products 

factors such as boiler characteristics and pollution controls, as well as the type of biomass that 

is used for fuel (black liquor, waste paper products, wood chips, etc.) 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 113 million metric tons for the pulp and paper industry 

in 2004. AEO 2006 projects that the industry’s carbon dioxide emissions will remain relatively 

static from 2004 to 2020, despite the expected increase in energy consumption. This projection 

reflects the industry’s utilization of less carbon-intensive biomass energy resources to meet 

increasing energy demand. 

As noted previously, if CEF and AEO 2006 projections overstate future production growth for 

the industry, energy-related CAP and carbon dioxide emissions could remain static or decrease 

from current levels. 

3.5.2 Best Case Scenario 

Opportunities 

Table 37 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

This opportunity assessment relies in large part upon a recent pulp and paper industry energy 

bandwidth study conducted on behalf of DOE that was published in August 2006.144 From the 

energy consumption baseline established by 2002 MECS data, the DOE energy bandwidth 

study estimates potential reductions in energy consumption that would be possible through 

industry-wide implementation of best available technologies (technologies and processes in 

place at the most modern mills) as well as energy-savings potential from industry-wide 

implementation of advanced technologies (practical minimums). DOE estimates that best 

available technologies have the potential to reduce the pulp and paper sector’s energy 

consumption by 26 percent and could reduce purchased energy requirements by 46 percent, 

with a 38 percent reduction in purchased electricity, and a 48 percent reduction in purchased 

fossil fuels. The largest areas of potential energy savings are in paper manufacturing (32 

percent reduction in energy consumption), pulping (28 percent reduction), and onsite energy 

generating applications (22 percent reduction in energy losses from cogenerating equipment 

used to produce electricity and steam, referred to as “powerhouse losses.”) Implementation of 

practical minimum technologies would further reduce sector energy consumption 17 below 

levels achieved by best available technologies. 

Though the energy bandwidth study does not address the wood products sector, given the 

larger energy requirements of the pulp and paper sector it provides an appropriate indication of 

the largest opportunities for reductions in sector energy consumption. 

Table 37: Opportunity assessment for the forest products industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Medium As the industry meets a substantial fraction of its requirements for thermal energy and 

electricity with biomass fuels, it uses emissions-intensive energy sources such as coal and 

petroleum primarily as marginal fuels, except for the direct fossil fuel inputs required by lime 

kilns in kraft mills.

145 Thus, transitioning to cleaner fuels is not considered to represent a 

substantial opportunity for environmental improvement. Increased biomass utilization is 

considered a key opportunity for the industry, but this opportunity is discussed in connection 

with the Process Improvement and R&D categories below. 

U.S. Environmental Protection Agency 3-47 March 2007 
Sector Energy Scenarios: Forest Products 

Opportunity Ranking Assessment (including potential barriers) 

Increased CHP Low Though approximately 65 percent of the sector’s electricity demand is met by CHP, the 

majority of the sector’s demand for steam is met by CHP, limiting the opportunity for 

additional CHP capacity. There is opportunity to increase the electricity-to-steam ratio of 

CHP applications through gasification technologies,146 and such opportunities are discussed 

in connection with R&D efforts below. 

Though the forest products sector is currently a net importer of electricity, industry 

representatives are concerned that recent changes in policy under the Public Utility 

Regulatory Policies Act (PURPA), Section 210(m), have created less favorable market 

conditions for onsite power generation. These changes eliminated requirements that 

electrical utilities purchase power from qualifying facilities in certain markets.147 The forest 

products industry believes the new policy presents a barrier to increasing the use of CHP 

and other technologies that have the potential to increase onsite power generation.148 New 

CHP installations may also face barriers in terms of utility rates and interconnection 

requirements if electricity production is expected to exceed onsite demand, and also from 

NSR/PSD permitting.149 

Equipment retrofit/ 

replacement 

Medium Energy efficiency gains are achievable through retrofits and through replacement of old 

equipment with more energy-efficient models. According to DOE, there are substantial 

energy-savings opportunities associated with implementation of equipment-related best 

practices, as well as with retrofit and replacement of process equipment—for example, 

installation of shoe presses to reduce drying energy requirements.150 There are also energysavings opportunities associated with power generating equipment, as a majority of 

recovery furnaces and conventional power boilers in existing pulp and paper plants are 20 to 

30 years old; more than half of them will need to be replaced or upgraded in the near 

future.151 

Limiting the magnitude of equipment-related opportunities, capital turnover in the sector is 

slow—equipment is capital intensive and has a long service life, and as industry is currently 

stagnant, there is little need for expanded production capacity that would drive new 

equipment purchases. Making a business case for equipment modifications can be difficult 

unless the change is urgently needed to maintain production or environmental compliance. 

Anecdotal evidence suggests that this climate of scarce capital has discouraged operations 

managers from advocating even low-risk, cost-effective improvements in energy 

efficiency.

152 Additionally, mills that want to expand or modify their operations may be 

subject to PSD or NSR programs. 

Process 

improvement 

High Process optimization is expected to continue to be an important mechanism for achieving 

energy efficiency gains for the forest products industry. AF&PA prioritizes further efforts to 

increase energy recovery from biomass waste, both through implementation of existing best 

practices and from new technology development.153 

Due to the substantial energy requirements of the drying stage of the papermaking process, 

DOE estimates that the largest potential energy savings are from implementation of bestavailable technologies in the paper drying process, and substantial additional potential in 

connection with liquor evaporation, and pulp digesting processes.154 (In the DOE bandwidth 

study, potential energy savings from best-available technology implementation include 

equipment retrofits and replacement as well as process improvement, and it is not possible 

to disaggregate the relative potential savings from these opportunities.) 

DOE notes that as much of the sector’s boiler fuel comes from renewable biomass fuels that 

are manufacturing process byproducts, there is a tradeoff between increased process 

efficiency (which reduces byproducts) and biomass fuel availability.

155 

R&D High As the forest products industry has limited resources to devote to R&D efforts, the support of 

programs like DOE’s Industrial Technologies Program is essential to achieving new 

technology development objectives. In partnership with DOE, the Forest Products Industry’s 

Agenda 2020 has established a roadmap of R&D priorities, and there is a strong R&D 

pipeline for the industry (see http://www.eere.energy.gov/industry/forest/). 

DOE prioritizes three areas as having the greatest opportunity for energy savings: (1) In 

paper drying, increasing the solids content of material exiting the press sections to reduce 

drying energy requirements; (2) reducing energy requirements for black liquor evaporation 

through nonevaporative concentration of weak black liquor, which can be accomplished 

through processes like ultrafiltration or multiple effect evaporation; and (3) increasing the 

energy efficiency of the lime kiln.156 AF&PA has a strong interest in the development of 

technologies to more fully exploit the industry’s biomass resources for energy recovery.

157 

U.S. Environmental Protection Agency 3-48 March 2007 
Sector Energy Scenarios: Forest Products 

Opportunity Ranking Assessment (including potential barriers) 

Other developing technologies that DOE describes as having the potential to enable the 

industry to achieve practical minimum energy consumption include: (1) CondeBelt drying 

systems, which have higher drying rates by utilizing the temperature differential between 

heated and cooled drying belts; (2) black liquor and biomass gasification, involving the 

production of gas fuel from biomass process waste which, in combination with combined 

cycle cogeneration turbines, would greatly increase the efficiency of onsite power 

generation; and (3) forest biorefineries, which extract hydrogen and other chemical 

feedstocks from wood chips prior to pulping, creating another value stream for the industry. 

According to DOE, the net energy efficiency of the biorefinery model is still being 

investigated,158 but biorefineries are closer to commercialization than gasification 

technologies.159 

General R&D barriers include the costs and risks associated with developing and 

commercializing new technologies. As the industry develops improved technologies and 

processes for utilizing biomass energy resources, one concern noted previously how 

policies that promote biomass energy might increase demand and bid up the cost of the 

industry’s raw material. 

Optimal Future Trends 

CEF’s advanced energy scenario for the pulp and paper industry is similar to the base case 

projection, with an even greater share of the sector’s energy needs met by biomass fuels, and a 

slight decrease in coal use as the industry makes even greater reductions in carbon-intensive 

fuels. AF&PA notes that the industry’s objective is to meet an even greater fraction of its energy 

needs with renewable biomass fuels than the 73 percent share noted in CEF’s advanced energy 

scenario.160 The annual decrease in economic energy intensity (energy consumption per dollar 

value of output) is slightly larger than under the reference case scenario, and the projected 

increase in overall energy use is smaller than under the reference case projection. Compared 

with the reference scenario, under the advanced scenario, the industry uses even more 

biomass and relatively less purchased electricity, with electricity inputs falling 22 percent from 

1997 levels by 2020. 

U.S. Environmental Protection Agency 3-49 March 2007 
Sector Energy Scenarios: Forest Products 

CEF’s advanced case projections are summarized in Table 38. 

Table 38: CEF advanced case projections for the pulp and paper industry 

1997 Advanced Case 2020 Advanced Case 

Consumption 

(quadrillion Btu) uuu 

Percentagevvv Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.123 4% 0.068 2% 

Natural gas 0.677 23% 0.429 14% 

Coal 0.395 13% 0.107 4% 

Renewables 1.483 50% 2.186 73% 

Delivered electricity 0.259 9% 0.201 7% 

Total 2.937 100% 2.991 100% 

Annual % change in economic energy intensity (energy consumption per dollar value of output) -1.0% 

Overall % change in energy consumption (1997-2020) 2% 

CEF’s advanced case projections are based on the same economic growth assumption as the 

reference case (1.2 percent per year). As previously noted, CEF’s economic assumptions are 

probably overly optimistic given recent industry trends, and if the trend of decreasing production 

continues, sector energy consumption would be expected to continue to decline as well. In 

comparison with the reference case, the faster decline in economic energy intensity is produced 

by CEF’s more aggressive assumptions about energy efficiency increases in new and existing 

equipment including increased energy efficiency of boilers, steam systems, and motors, falling 

film black liquor evaporation, increased lime kiln efficiency, and black liquor gasification.www 

Environmental Implications 

Under the CEF advanced case, the decrease in purchased electricity means that energy-related 

emissions will be concentrated somewhat more at the facility level, as opposed to the utility 

level. However, due to the energy losses associated with electric generation (particularly from 

fossil fuel-fired power plants), transmission, and distribution, energy production at the facility 

level is generally more energy efficient, and thus represents an environmentally preferable 

energy scenario. Reductions in coal consumption under the advanced energy scenario are 

expected to decrease CAP emissions, particularly sulfur dioxide and nitrogen oxides. 

Under the advanced energy scenario CEF projects the pulp and paper industry to achieve a 52 

percent reduction in 1997 carbon emissions levels by 2020, despite the projected increase in 

overall energy consumption. This difference is attributable to increased energy efficiency and 

reductions in carbon-intensive energy inputs such as coal. Increased use of carbon-neutral 

biomass fuels will be a key component of achieving reductions in net carbon emissions. 

uuu As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel 

consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF 

analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as 

compared with the reference case. 

vvv Percentages do not add to 100% due to independent rounding. 

www We have noted just a few of the parameter modifications made by CEF under the advanced case NEMS modeling effort. 

Appendix A-2 of the CEF report contains more detailed descriptions of CEF’s advanced case scenario parameters. 

U.S. Environmental Protection Agency 3-50 March 2007 
Sector Energy Scenarios: Forest Products 

3.5.3 Other Reference Materials Consulted 

American Forest & Paper Association. Policy Issues: Access to the Electric Transmission Grid. Internet source. Available at 

http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginalID 

=286&InterestCategoryID=289&ExpList=286. 

American Forest & Paper Association. Policy Issues: Biomass. Internet source. Available at 

http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginalID 

=286&InterestCategoryID=290&ExpList=286. 

American Forest & Paper Association. Policy Issues: Industry Profile. Internet source. Available at 

http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginalID 

=286&InterestCategoryID=287&ExpList=286. 

American Forest & Paper Association. Policy Issues: Research & Development. Internet source. Available at 

http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginalID 

=286&InterestCategoryID=291&ExpList=286. 

American Forest & Paper Association. The Forest Products Industry and National Energy Security. Available at 

http://www.afandpa.org/Template.cfm?Section=Energy1&template=/ContentManagement/ContentDisplay.cfm&ContentID=7316. 

Center for Technology Transfer, Inc. Wisconsin’s Wood Products Industry Business Climate Status Report. 2004. 

Miner, R., Lucier, A. A Value Chain Assessment of Climate Change and Energy Issues Affecting the Global Forest-Based 

Industry. Internet source. Accessed January 27, 2006. 

PriceWaterhouseCoopers. Global Forest and Paper Industry Survey. 2005. Internet source. Available at 

http://www.pwcglobal.com/extweb/pwcpublications.nsf/docid/e1f575ac5d728ff88525703c00287953. 

The Policy Council. U.S. Wood products Industry: Competitive Challenges in a Global Marketplace. 2005. Internet source. 

Available at http://policycouncil.nationaljournal.com/EN/Forums/American+Forest++Paper+Association/1f7d98e5-d352-45be8ec6-0d335ee9a4f7.htm. 

Ruth, M., Davidsdottir, B., Amato, A. 2004. “Climate Change Policies and Capital Vintage Effects: The Cases of Pulp and Paper, 

Iron and Steel, and Ethylene.” Journal of Environmental Management, 70; 235-252. 

Thomson Gale. SIC 2611 Pulp Mills. Internet source. Available at http://www.referenceforbusiness.com/industries/PaperAllied/Pulp-Mills.html. 

U.S. Department of Energy. Forest Products Project Fact Sheet: Combined Cycle Biomass Gasification. 1999. Available at 

http://www.eere.energy.gov/industry/forest/pdfs/biomass_gasification.pdf. 

U.S. Department of Energy. Forest Products Project Fact Sheet: Development of Methane de NOx® Reburning Process for 

Wood Waste, Sludge, and Biomass Fired Stoker Boilers. Available at 

http://www.eere.energy.gov/industry/forest/pdfs/methane_denox.pdf. 

U.S. Department of Energy. Forest Products Project Fact Sheet: Microwave Pretreatment: In-Mill, Kiln Schedule, and Process 

Model. 2001. Available at http://www.eere.energy.gov/industry/forest/pdfs/microwave_pretreatment.pdf. 

U.S. Department of Energy. Forest Products Project Fact Sheet: The Lateral Corrugator. 2001. Available at 

http://www.eere.energy.gov/industry/forest/pdfs/lateral_corrugator.pdf. 

U.S. Department of Energy. Forest Products Project Fact Sheet: Decontamination of Process Streams Through Electrohydraulic 

Discharge. 2002. Available at http://www.eere.energy.gov/industry/forest/pdfs/electrohydraulic_discharge.pdf. 

U.S. Department of Energy. Forest Products Project Fact Sheet: Lignin Separation and Epoxide-Lignin Manufacturing. 2002. 

Available at http://www.eere.energy.gov/inventions/pdfs/lenox.pdf. 

U.S. Department of Energy. Forest Products Project Fact Sheet: ThermodyneTM Evaporator. 2002. Available at 

http://www.eere.energy.gov/inventions/pdfs/merrillaireng.pdf. 

U.S. Department of Energy. Energy Implications of Environmental and Technological Transition. Available at 

http://www.eia.doe.gov/cneaf/solar.renewables/at_a_glance/wood/woodenfa-05.htm. 

U.S. Environmental Protection Agency 3-51 March 2007 
Sector Energy Scenarios: Forest Products 

U.S. Department of Energy. Forest Products Industry Analysis Briefs: Energy-Management Activities. 2004. Internet source. 

Available at http://www.eia.doe.gov/emeu/mecs/iab98/forest/activities.html. 

U.S. Department of Energy. ITP Wood products: Success Stories. Internet source. Accessed January 27, 2006. 

U.S. Department of Energy. Energy and Environmental Profile of the U.S. Pulp and Paper Industry. 2005. Available at 

http://www.eere.energy.gov/industry/forest/pdfs/pulppaper_profile.pdf. 

U.S. Department of Energy. Wood Products Industry Profile. 2005. Available at 

http://www.eere.energy.gov/industry/forest/pdfs/forest.pdf. 

U.S. Department of Energy. Forest Products: Fiscal Year 2004 Annual Report. 2005. Available at 

http://www.eere.energy.gov/industry/about/pdfs/forest_fy2004.pdf. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency. New Source Review: Report to the President. 2002. 

U.S. Environmental Protection Agency, Office of Enforcement and Compliance Assurance. Profile of the Pulp and Paper 

Industry, 2nd Edition. 2002. 

World Business Council for Sustainable Development. The Sustainable Wood products Industry, Carbon, and Climate Change. 

Available at http://www.wbcsd.org/web/publications/sfpi-cop11.pdf. 

U.S. Environmental Protection Agency 3-52 March 2007 
Sector Energy Scenarios: Iron and Steel 

3.6 Iron and Steel Recent Sector Trends Informing the Base Case 

3.6.1 Base Case Scenario Number of facilities: ↓

Situation Assessment Value of shipments: Mixed (see text for explanation) 

Energy consumption/ton of steel shipped: ↓

The iron and steel industry participates in EPA’s 

Sector Strategies Program. To produce steel, Major fuel sources: Coal, natural gas, coke, electricity 

facilities in the iron and steel industry (NAICS Current economic and energy consumption data are 

331111) employ one of two production summarized in Table 39 on page 3-55. 

processes, which utilize a variety of raw 

materials and technologies and have different 

energy use profiles: 

• Integrated steel mills use a blast furnace to produce molten iron from iron ore, coal, coke, 

and fluxing agents. A basic oxygen furnace (BOF) is then used to convert the molten iron, 

along with up to 30 percent steel scrap and alloys, into refined steel. Integrated 

steelmaking has declined from 52.6 percent of U.S. steelmaking production in 2001 to 

44.9 percent of production in 2005 (estimated value updated March 2006).161 

• Electric arc furnace (EAF) steel mills utilize steel scrap and up to 30 percent of other ironbearing materials to produce steel. EAF steel plants primarily produce carbon steels as 

well as alloy and specialty steels. EAF steelmaking has grown from 47.4 percent of U.S. 

steelmaking production in 2001 to 55.1 percent of production in 2005 (estimated value 

updated March 2006).162 

As certain steel qualities require the use of virgin materials, and as there are constraints on the 

supply of economically available steel scrap, both integrated steelmaking and EAF steelmaking 

are required and are not direct substitutes for one another. A recent study notes that some 

integrated steel companies have adopted production technologies traditionally used in minimills 

(such as advanced EAFs and thin slab casting), and distinctions between the integrated and 

EAF segments of the industry may be blurring.163 Though the share of steel produced by the 

EAF process has steadily increased (growing from 47 percent to 55 percent of total steel 

production from 2001 to 2005164), expansion of EAF steelmaking capacity is predicated on the 

availability of adequate and cost-effective supplies of scrap. According to AISI, the addition of 

alternative ironmaking technologies will be essential to facilitating EAF capacity expansion.165 

Though both processes are energy intensive, integrated steelmaking requires greater amounts 

of energy per ton of shipped product. Different studies of energy use in the iron and steel 

industry often employ somewhat different assumptions and boundary conditions which may lead 

to slightly different energy intensity measurements (energy use per ton of production). Industry 

data from 2004 establish an average energy intensity of 18.99 million Btu per ton (MBtu/ton) for 

integrated steelmaking and 5.01 MBtu/ton for EAF steelmaking, with an industry-wide intensity 

of 11.8 MBtu/ton (based on EAF steelmaking at a 53 percent market share).166 A 2005 DOE 

study estimates the average energy intensity of integrated steelmaking at 16.5 MBtu/ton, and 

EAF steelmaking at 5.7 MBtu/ton.167 

Iron and steel production is fairly concentrated geographically, with more than 85 percent of the 

sector’s energy use occurring in the Midwest (64 percent) and South (23 percent).168 

Steelmaking in Indiana, Illinois, Ohio, Pennsylvania, Michigan, and New York accounts for 

approximately 80 percent of U.S. production.169 

Beginning with employment contraction in the 1980s and accelerating through bankruptcies in 

the 1990s and early 2000s, the U.S. steelmaking industry has recently undergone major 

U.S. Environmental Protection Agency 3-53 March 2007 
Sector Energy Scenarios: Iron and Steel 

restructuring.170 Despite the overall growth in value of shipments and value added from 1997 to 

2004 (see Table 39), those metrics declined steadily from 1997 to 2003 and then jumped 

precipitously in 2004 following increases in the price of steel.171 (The price increase was driven 

by a surge in global demand for raw materials due to economic growth in China and other Asian 

countries, as noted Section 2.4.1.) Restructuring strengthened the financial viability of domestic 

steel production, and the industry’s dramatic turnaround was supported by temporary tariffs on 

imported steel enacted by the Bush Administration in 2002.172 As a result of the industry’s 

improved economic condition, an industry survey conducted in 2005 indicated that steel 

producers anticipated increasing their capital spending by 30 percent over the next two years to 

promote technological changes.173 The same study notes that for 2005-2006, companies were 

expecting to increase investments in new equipment by 43 percent over 2003-2004 levels. 

Despite the recent return to profitability, in the long term U.S. steelmakers remain vulnerable to 

fluctuations in global supply and demand. China recently became a net exporter of steel, and 

the United States is joined by other steel-producing countries in its concerns about the potential 

for Chinese production to contribute to a glut in global steel supply.174 

Since 1990, the widespread automation of steel production (facilitated by an industry R&D 

partnership with DOE) and the introduction of thin slab casting and ladle refining furnaces have 

also decreased the energy intensity of steelmaking. Thin slab casting reduced reheating energy 

requirements and increased the variety of products that EAF steelmakers were able to produce 

(such as flat rolled steel).175 Economic trends and associated industry restructuring have also 

contributed to declining energy intensity. In the last fifteen years, there has been substantial 

industry consolidation that involved the closure of older and less efficient steelmaking facilities. 

According to data compiled by AISI, the composite energy intensity of the U.S. steelmaking 

industry (integrated and EAF production) has declined from 16.4 MBtu/ton in 1990 to 11.8 

MBtu/ton in 2004, a decrease of 28 percent.176 

Incremental energy efficiency improvements at the plant level may not be able to produce 

energy intensity reductions of similar magnitude to those that the industry has historically 

achieved through the transformational processes discussed above. AISI has launched an R&D 

initiative called “Saving One Barrel of Oil Per Ton (SOBOT)” that seeks to achieve the next 

revolution in energy intensity reduction through the development of new transformational 

technologies and processes that are less energy intensive as well as R&D efforts aimed at 

decreasing the energy intensity of existing processes.177 Using different boundary assumptions 

than the AISI estimate, the 2005 Steel Industry Marginal Opportunity Study conducted by 

Energetics on behalf of DOE estimates that an energy intensity reduction of 5.1 MBtu/ton is 

technically achievable for integrated steelmaking, with implementation of industry best practices 

and commercially available technologies comprising slightly more than half of that potential, and 

R&D opportunities comprising the remaining fraction. For EAF steelmaking, the analysis 

estimates a technically achievable energy intensity reduction of 2.7 MBtu/ton,xxx with 

implementation of industry best practices and commercially available technologies comprising 

two thirds of that potential, and R&D contributing the remaining third.178 Discussion of specific 

opportunities is included in Section 3.6.2. 

Energy costs account for about 20 percent of the total cost of manufacturing steel. 

179 Coke and 

coal meet a combined 39 percent of the iron and steel industry’s energy needs. (Though not 

xxx DOE produced this estimate of technically achievable potential by taking the difference between the current energy intensity 

of EAF steelmaking (5.7 MBtu/ton) and a practical minimum energy requirement that is estimated to be 3.0 MBtu/ton. AISI 

notes that energy-savings opportunities described by DOE as technically available may not be economically viable in all 

facilities. 

U.S. Environmental Protection Agency 3-54 March 2007 
Sector Energy Scenarios: Iron and Steel 

considered as part of this study, steelmaking also uses coal and coke as raw materials. They 

are sources of carbon which, in combination with iron, produces steel.) As natural gas meets 27 

percent of the sector’s energy requirements, increases in the price of natural gas are a 

significant concern for the industry. Reducing natural gas requirements is one of the goals 

motivating the industry’s investment in SOBOT.180 Byproduct fuels produced onsite (listed as 

“Other” in MECS, such fuels are primarily coal-based coke oven gas and blast furnace gas) and 

purchased electricity are also important energy inputs. The mix between fuel-based and 

electricity-based energy inputs differs between integrated and EAF steelmaking. Integrated 

steelmaking accounts for roughly 75 percent of the industry’s fuel consumption and 36 percent 

of the industry’s electricity consumption, while EAF steelmaking accounts for 25 percent of the 

industry’s fuel consumption and 64 percent of its electricity consumption (fractions based on 

1998 MECS data).181 

Table 39 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 39: Current economic and energy data for the iron and steel industry 

Economic Production Trendsyyy 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

1.1% 8.3% 1.7% 6.1% 

Energy Intensity in 2002zzz 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

66.5 27.8 20.4% 8.0% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Coke & Breeze Natural Gas Otheraaaa Net Electricity Coal 

36% 27% 21% 13% 3% 

yyy Economic trend data are for the larger NAICS category, iron, steel, and ferroalloy manufacturing (NAICS 33111). 

zzz Energy intensity data are for the larger NAICS category, iron, steel, and ferroalloy manufacturing (NAICS 33111). 

aaaa For iron and steel, the “other” category is largely composed of byproduct fuels such as coke oven gas and blast furnace gas 

(coal-based in origin). 

U.S. Environmental Protection Agency 3-55 March 2007 
Sector Energy Scenarios: Iron and Steel 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 12% 

Fuel Oil Coal Other 

Fraction of natural gas inputs that could be 

met by alternate fuels 

73% 13% 9% 

Fuel-Switching Potential in 2002: Coal to Alternate Fuels 

Switchable fraction of coal inputs 3% 

Other Natural Gas 

Fraction of coal inputs that could be met by 

alternate fuels 

60% 40% 

Expected Future Trends 

Controlling energy costs is critical to maintaining the competitive viability of the U.S. iron and 

steel industry in the global marketplace. Recent restructuring has strengthened the industry’s 

position and is expected to spur investment in new technologies.182 In the long term, global 

supply and demand fluctuations will 

continue to play a role in the industry’s Voluntary Commitments financial condition and capacity for 

investment in energy efficiency The American Iron and Steel Institute (AISI) collects data for five 

improvement. indicators of sustainability: energy intensity, GHG emissions, 

material efficiency, steel recycling, and implementation of 

The expansion of EAF steel production environmental management systems. AISI has also shown its 

and contraction of integrated steel commitment to improvements with regard to energy and the 

production has historically decreased the environment by joining Climate VISION. With its participation in 

overall energy intensity of the steelmaking this program, AISI has committed to improving member energy 

industry. According to 2005 data, more efficiency by 10 percent by 2012 (from 2002 levels). See 

than 75 percent of end-of-life steel http://www.climatevision.gov/sectors/steel/index.html. 

products in the United States are The steel sector also participates in DOE’s Industrial 

recycled, including 100 percent of end-of- Technologies Program (ITP) as an “Energy Intensive Industry.” 

life automobiles, 90 percent of end-of-life ITP’s goals for all energy intensive sectors include the following: 

appliances, and 63 percent of used  Between 2002 and 2020, contribute to a 30 percent steel cans.

183 Use of suboptimal scrap decrease in energy intensity. produces more waste and requires more  Between 2002 and 2010, commercialize more than 10 

energy to process. One industry industrial energy efficiency technologies through research, 

assessment states that some EAF mills development & demonstration (RD&D) partnerships. 

have sought to mitigate the risk of scrap See http://www.eere.energy.gov/industry/steel/. 

market volatility through investment in 

onsite alternative ironmaking (AI) 

production units to supplement scrap inputs. According to that analysis, due to the energy 

intensity of AI production, increased domestic AI production could slow the rate of energy 

intensity reduction at EAF mills.184 

As noted at the beginning of Chapter 3, the age of the CEF study (produced in 2000 and using 

energy data from 1998) means that its projections are outdated in some cases, and particularly 

for the iron and steel industry, which has undergone substantial restructuring since the CEF 

report was produced. However, as the CEF report provides the best-available cross-sector 

U.S. Environmental Protection Agency 3-56 March 2007 
Sector Energy Scenarios: Iron and Steel 

assessment of business-as-usual and environmentally preferable energy trends, we include its 

projections for the iron and steel sector as we do for other sectors addressed in this report. 

The iron and steel industry is one of the three sectors (along with cement and paper) for which 

CEF made detailed parameter modifications to the NEMS model used to produce AEO 1999. 

Modifications included adjustments to baseline energy intensities and rates of annual 

improvement in energy intensity, which were adjusted to reflect best-available sector-specific 

research at the time (primarily a 1999 study by Worrell et. al. at Lawrence Berkeley National 

Laboratory, Energy Efficiency and Carbon Dioxide Emissions Reduction Opportunities in the 

U.S. Iron and Steel Sector). 

Under the reference case scenario, CEF projects that energy consumption by the iron and steel 

industry will decrease 15 percent from the 1997 baseline by 2020 and that energy intensity will 

decline at 1.4 percent per year over the period. 

CEF projects no major fuel mix shifts for the iron and steel industry under the reference case. 

Consumption of all fuels is expected to decline, with the exception of purchased electricity, 

which CEF expects will increase slightly (2 percent). Natural gas use falls by the greatest 

amount (28 percent), contributing to the increase in the relative importance of coal, despite the 

fact that coal consumption is projected to fall by 10 percent. 

CEF’s projections are based on the economic assumptions that steel production will increase at 

0.9 percent per year. The projected reduction in energy consumption for the industry is in part 

attributable to CEF’s assumptions about structural changes within the sector: CEF uses the 

AEO 1999 assumption that integrated steelmaking will drop from a 61 percent share of total 

production in 1994 to 54 percent in 2020, with an increase in EAF steelmaking from 39 percent 

to 46 percent over the same period. (These assumptions are outdated now that EAF 

steelmaking currently comprises more than 50 percent of steel production.) CEF’s assumptions 

about adoption of energy-efficient technologies also contribute to the projected decline in energy 

consumption. For example, CEF made adjustments to the AEO 1999 NEMS parameters for the 

unit energy consumption values and retirement rates for existing equipment, as well as new 

equipment expected to be installed over the period. At the same time, CEF’s technology 

assessments are based on a Lawrence Berkeley National Laboratory (LBNL) study that relied 

on industry data from 1994. A more recent industry assessment by DOE assumes that 50 

percent of the energy-savings opportunities estimated in that LBNL study have already been 

achieved as of 2005.185 (More detailed information about the assumptions underlying CEF’s 

projections and how those assumptions were reflected in CEF-NEMS modeling can be found in 

Appendix A2 of the CEF report. However, it is not possible to determine from report 

documentation how much of the projected decline in energy consumption is attributable to 

structural change within the sector, and how much is attributable to energy efficiency 

improvement.) 

U.S. Environmental Protection Agency 3-57 March 2007 
Sector Energy Scenarios: Iron and Steel 

CEF base case projections are summarized in Table 40. 

Table 40: CEF reference case projections for the iron and steel industry 

1997 Reference Case 2020 Reference Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.118 7% 0.103 7% 

Natural gas 0.541 32% 0.390 27% 

Coal 0.873 51% 0.783 54% 

Delivered electricity 0.173 10% 0.176 12% 

Total 1.705 100% 1.452 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -1.4% 

Overall % change in energy use (1997-2020) -15.0% 

As previously noted, EAF steelmaking has surpassed the market share that CEF projected 

would be achieved by 2020. In an effort to assess the impact of recent trends that may have 

affected industry energy consumption since the CEF report was produced, we also examined 

reference case energy consumption projections for the iron and steel industry produced in 

connection with EIA’s Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS 

model but incorporates more recent energy and economic data. In line with CEF projections, 

AEO 2006 projects annual growth in the industry’s value of shipments to be 0.9 percent per 

year, and industry-wide energy intensity to decline at 1.4 percent per year primarily due to the 

assumption that most new steelmaking capacity in the United States will be EAF production. (As 

previously noted, constraints on viable scrap supply impose limits on EAF production capacity, 

and the addition of alternative ironmaking technologies will be essential to facilitating EAF 

capacity expansion.) AEO 2006 projects that sector energy consumption will decline by 3.5 

percent from 2004 to 2020 (substantially less than the 15 percent projected by CEF), with coal 

consumption decreasing by 11 percent, and electricity consumption increasing by 14 percent. 

Environmental Implications 

Figure 16: Iron and steel sector: energy-related CAP emissions 

Iron & Steel Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 228,000 tons) 

CO 

55% 

NH3 

1% 

NOX 

20% 

PM10 

3% 

SO2 

19% 

VOC 

2% 

Source: Draft 2002 NEI 

Iron & Steel Sector: 

NEI CAP Emissions 

(Total: 851,000 tons) 

All other* 

73% 

Energyrelated 

27% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

U.S. Environmental Protection Agency 3-58 March 2007 
Sector Energy Scenarios: Iron and Steel 

Figure 16 presents NEI data on energy-related 

CAP emissions by pollutant type for the iron and Effects of Energy-Related CAP Emissions 

steel industry. Although NEI data attribute SO2 and NOx emissions contribute to respiratory illness 

emissions from electric power generation to the and may cause lung damage. Emissions also 

generating source rather than the purchasing contribute to acid rain, ground-level ozone, and 

entity, purchased electricity meets around ten reduced visibility. 

percent of the sector’s energy needs, so the 

above figure provides a fairly complete picture of 

the sector’s energy-related CAP emissions. (Though EAF steelmaking is electricity intensive, 

the magnitude of the fuel requirements for integrated steelmaking means that electricity remains 

a fairly small fraction of total energy consumption.) Sulfur dioxide and nitrogen oxide emissions 

are the largest fractions of energy-related CAP emissions. (As noted in Section 2.3.3, NEI data 

on carbon monoxide emissions appear higher than would be expected for stationary sources, so 

we do not address carbon monoxide data in our assessment of CAP emissions for each sector.) 

Figure 17: Iron and steel sector: CAP emissions by source category and fuel usage 

Iron & Steel Sector: 

Energy-Related CAP Emissions by Source 

(Total: 228,000 tons) 

External 

Combustion 

Boilers 

59% 

Industrial 

Processes 

41% 

Other 

<1% 

Internal 

Combustion 

Engines 

<1% 

Source: Draft 2002 NEI 

Iron & Steel Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 228,000 tons) 

Process Gas 

52% 

By-product 

Coke Mfg. 

33% 

Residual Oil 

1% 

Coal 

1% 

All Others 

1% 

Natural Gas 

12% 

Source: Draft 2002 NEI 

Figure 17 presents NEI data on energy-related CAP emissions by source category and fuel 

type. Though the largest fraction of energy-related CAP emissions is from external combustion 

boilers, emissions that are classified as related to industrial processes are also substantial. NEI 

data classifications are problematic due to reporting inconsistencies, as discussed previously, 

but equipment classified under “external combustion boilers” includes cogenerating units used 

to produce heat and electricity, and boilers used for process heating. Equipment classified 

under “industrial processes” in NEI likely includes fired systems such as blast furnaces, metal 

melters, and heaters. Highlighting possible issues with NEI data classifications, according to 

DOE, more than 80 percent of the industry’s energy requirements are for fired systems such as 

furnaces, with boiler systems comprising approximately 7 percent of total energy use.186 

In integrated steelmaking, the conversion of coal to coke is fueled by a mixture of natural gas 

and byproducts of the process such as coke oven gas. Energy-related emissions from this 

process are likely classified as “byproduct of coke manufacturing” in NEI data. The industry also 

uses other byproduct gases such as blast furnace gas, BOF gas, and EAF gas,187 which may be 

classified in NEI as “process gas.” Byproduct gases are also used as boiler fuel. As NEI data 

are dependent on emissions reporting from a number of different sources, it is difficult to 

precisely align reported energy-related emissions with sector energy consumption data from 

sources such as MECS. 

As previously noted, the CEF energy consumption projections are dated for a number of 

reasons, and AEO 2006 projects that sector energy consumption will remain relatively static 

U.S. Environmental Protection Agency 3-59 March 2007 
Sector Energy Scenarios: Iron and Steel 

(decreasing at 0.2 percent per year). To the extent that declining coal consumption in the iron 

and steel industry is attributable to energy efficiency improvement (AISI states that as an 

industry-wide average, reasonable and obtainable energy efficiency improvements at the plant 

level can be expected to reduce energy consumption per ton of production by around 0.7 

percent per year), such trends would decrease energy-related CAP emissions at the facility 

level.188 Reducing natural gas consumption in favor of cheaper coal-based byproduct gases 

would reflect optimization of waste streams for their energy content. Increases in purchased 

electricity would affect CAP emissions at the utility level, and emissions impacts would depend 

upon local energy inputs for electric power generation. According to AISI, DOE’s assumptions 

about increasing EAF production may not be accurate. 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 127 million metric tons for the iron and steel industry in 

2004. AEO 2006 projects that the industry’s carbon dioxide emissions will decline by 3 percent 

from 2004 to 2020, in line with the expected decrease in sector energy consumption. 

3.6.2 Best Case Scenario 

Opportunities 

Separate opportunity assessments have been conducted for integrated and EAF steelmaking 

processes using the DOE and AISI analyses. For integrated steelmaking, Table 41 ranks the 

viability of five primary opportunities for improving environmental performance with respect to 

energy use (Low, Medium, or High). A brief assessment of the ranking is also provided, 

including potential barriers. Table 42 provides a similar assessment for EAF steelmaking. 

Table 41: Opportunity assessment for integrated steelmaking 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low Though the industry is likely to remain heavily dependent on coal, DOE estimates that 

there are opportunities for greater utilization of coke oven gas and other off-gas byproducts 

for energy content.189 According to AISI, most coke oven gas produced by U.S. mills is 

already used, and other technologies for capture and reuse of steelmaking off-gases have 

not been adopted in the United States because they are not economically viable to deploy 

here given current energy prices.190 

Increased CHP Medium Integrated steelmaking has less demand for electricity than EAF production, but the DOE 

marginal opportunity study notes the opportunity for increased cogeneration, including 

repowering current systems with off-gas turbine/steam turbine systems (0.48 MBtu/ton). 

According to DOE, heat recovery opportunities lie with the sintering (0.09 MBtu/ton), BOF 

(0.4 MBtu/ton), and annealing processes (0.29 MBtu/ton).191 AISI describes cogeneration 

opportunities associated with non-recovery cokemaking, which combusts cokemaking offgases to produce steam to drive a steam turbine generator and produce electricity, either 

for internal plant use or for sale to the grid. Currently, cokemaking off-gases are processed 

into materials with economic value (coke oven gas, tar, ammonia, and other chemicals).192 

Whether CHP is economically viable depends in large part upon the comparative value of 

electricity production versus the capital costs of the CHP equipment. New CHP installations 

also face barriers in terms of utility interconnection requirements if electricity production is 

expected to exceed onsite demand, and also from NSR/PSD permitting.193 

Equipment retrofit/ 

replacement 

Low Equipment-related opportunities noted in the DOE marginal opportunity study include 

variable speed drives for pumps and fans (0.03 MBtu/ton), which AISI notes are already in 

wide use in the industry.

194 Additional equipment-related opportunities are included under 

“Process improvement.” 

U.S. Environmental Protection Agency 3-60 March 2007 
Sector Energy Scenarios: Iron and Steel 

Opportunity Ranking Assessment (including potential barriers) 

Process 

improvement 

Medium AISI notes that with existing technologies and best practices, improvements in blast 

furnace efficiency are possible through optimized injection technologies and better 

sensors/process control. Other near-term opportunities noted by AISI include blast furnace 

coal injection modeling (to reduce energy losses in the cokemaking process) and 

optimizing processes through minimizing the generation of scrap and oxides.195 

Though some of the process-related energy-savings opportunities noted in the DOE study 

require equipment installation or retrofits, for the purposes of this analysis they have been 

classified as process-related so that DOE’s estimated potential energy intensity reductions 

can be included. Options that are noted by DOE that are technically available but that may 

not be economically viable in all situations include the following: preventative maintenance 

(0.21 MBtu/ton); installation of energy monitoring and management systems for energy 

recovery and distribution between processes (0.06 MBtu/ton); coal moisture control and dry 

quenching in the cokemaking process (0.22 MBtu/ton); and in ironmaking (the most 

energy-intensive process), pulverized coal and natural gas injection, top pressure recovery 

turbines, hot blast stove automation, and systems for improved blast furnace control 

(combined 1.34 MBtu/ton). Casting/hot rolling energy efficiency opportunities include thin 

slab casting with tunnel furnace (0.93 MBtu/ton).196 

R&D High According to AISI, the greatest potential for reducing the energy intensity of steelmaking 

lies with development of new transformational technologies and processes. Examples of 

such transformational R&D efforts (applicable both to integrated and EAF steelmaking) 

include the following: (1) Molten oxide electrolysis (under development at MIT); (2) 

ironmaking by flash smelting using hydrogen (under development at the University of 

Utah); and (3) the paired straight hearth furnace (under development at McMaster 

University in Ontario, Canada).197 Other R&D opportunities for integrated steelmaking 

noted in the SOBOT analysis include reducing/optimizing energy usage in alternative 

ironmaking processes and increasing the scrap/hot metal ratio in the BOF charge.198 

An example of an alternative ironmaking process, the most significant R&D opportunity 

noted in the DOE study is replacement of traditional coke-based iron ore reduction 

(involving the energy-intensive blast furnace) with direct iron ore reduction using coal (2.58 

MBtu/ton).bbbb 199 The direct reduced iron opportunity has a shorter timeline (2010) than the 

other R&D opportunities noted by DOE, which assume implementation occurs by 2020. 

Other R&D opportunities noted by DOE include increased direct carbon injection in the 

ironmaking process (0.7 MBtu/ton), blast furnace slag heat recovery (0.28 MBtu/ton), and 

increased scrap input into BOF (3.1 MBtu/ton).200 

Casting and rolling R&D opportunities (applicable both to integrated and EAF steelmaking) 

include reduction of heat losses from cast products prior to rolling/reheating (0.75 

MBtu/ton) and near net shape casting. 201 Near net shape casting is a general term that 

refers to processes that eliminate a reheating step by casting in the final shape.202 AISI 

also describes energy-savings opportunities potentially available from near net shape 

casting, with thin strip casting representing the largest opportunity in terms of tons of steel 

production. (DOE estimates potential energy intensity reductions from thin strip casting at 

0.5–0.7 MBtu/ton.) Production of strip casting is presently limited to certain markets, and 

further research is needed to expand the market for this technology. AISI also notes beam 

blank casting as a growing opportunity for long products.203 

In general, major barriers to new technology and process development include not only the 

costs and risks associated with the research process itself, but also the implementation of 

new technology, once developed, is risky and in some cases may be considered a “bet the 

company” investment.204 Federal funding (i.e., through DOE’s Industrial Technologies 

Program) to mitigate the costs and risks associated with R&D efforts has also been 

reduced. 

bbbb The DOE report notes that if direct iron reduction potential was fully exploited, then some of the other R&D opportunities 

(such as those affecting blast furnace ironmaking) would not be applicable as they would represent double-counting. 

U.S. Environmental Protection Agency 3-61 March 2007 
Sector Energy Scenarios: Iron and Steel 

Table 42: Opportunity assessment for EAF steelmaking 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low Due to the substantial electricity requirements for EAF steelmaking, there is little 

opportunity for cleaner fuels. However, onsite renewable energy generation could have 

substantial environmental benefits. Barriers to onsite renewables include cost, resource 

intermittency, and utility interconnection requirements. 

Increased CHP Low CHP does not represent a major energy efficiency opportunity for EAF steelmaking as the 

sector has relatively low demand for steam and waste heat is difficult to recover. 

Equipment retrofit/ 

replacement 

Low Some equipment-related opportunities are included under “Process Improvement.” 

Process 

improvement 

Medium Process-related opportunities noted by AISI include improvements in process control (such 

as increased electrical energy transfer efficiency, reduced tap-to-tap times, and increased 

percentage of power-on time), and improved scrap preheating/charging practices and postcombustion practices.205 

Though some of the process-related energy-savings opportunities noted in the DOE study 

require equipment installation or retrofits, for the purposes of this analysis they have been 

classified as process-related so that DOE’s estimated potential energy intensity reductions 

can be included. DOE estimates that for EAF steelmaking, the energy-savings opportunity 

bandwidth from implementation of best practices and commercially available technology is 

as twice as large as the R&D opportunity bandwidth. Options that are noted by DOE that 

are technically available but that may not be economically viable in all situations include: 

installation of energy monitoring and management systems for energy recovery and 

distribution between processes; preventative maintenance; and improvements in the EAF 

process such as improved process control, oxy-fuel burners, DC-arc furnaces, scrap 

preheating, and post-combustion processes. The combined best practice/commercially 

available technology opportunity quantified by DOE is 1.8 MBtu/ton. Casting/hot rolling 

energy efficiency opportunities include thin slab casting with tunnel furnace (0.93 

MBtu/ton), which are applicable to both EAF and integrated steelmaking.206 

R&D High According to AISI, the greatest potential for reducing the energy intensity of steelmaking 

lies with development of new transformational technologies and processes. Examples of 

such transformational R&D efforts (applicable both to integrated and EAF steelmaking) 

include: (1) Molten oxide electrolysis (under development at MIT); (2) ironmaking by flash 

smelting using hydrogen (under development at the University of Utah); and (3) the paired 

straight hearth furnace (under development at McMaster University in Ontario, Canada).207 

AISI lists the following additional areas as important R&D opportunities for EAF 

steelmaking: improved processes for low-grade scrap recovery, as well as sensible heat 

recovery from slags, fumes, and off-gases.208 

R&D opportunities noted in the DOE study include increasing the efficiency of melting 

processes (0.4 MBtu/ton), integration of refining functions/reductions of heat losses prior to 

casting (0.35 MBtu/ton), economical heat capture from EAF waste gas (0.26 MBtu/ton), 

purification/upgrading to scrap, and effective utilization of slag and dust. Casting and rolling 

opportunities (applicable both to integrated and EAF steelmaking) include reduction of heat 

losses from cast products prior to rolling/reheating (0.75 MBtu/ton) and thin strip casting 

(0.5 – 0.7 MBtu/ton). 

R&D barriers (high costs and risks associated with new technology development, 

exacerbated by reduced availability of federal funds) are the same as those discussed in 

association with the integrated steelmaking R&D opportunity assessment. 

Optimal Future Trends 

The CEF advanced case projection shows a greater reduction in sector energy use and a larger 

annual decrease in energy intensity than under the business-as-usual projection. The largest 

fuel decrease is seen in the petroleum category, which falls by 83 percent from 1997 to 2020. 

Natural gas consumption falls by 36 percent, and purchased electricity falls by 20 percent. 

Though the coal fraction grows relative to other fuel inputs, total coal consumption falls by 13 

percent over the period. Table 43 summarizes the CEF advanced case projections for the iron 

and steel industry. 

U.S. Environmental Protection Agency 3-62 March 2007 
Sector Energy Scenarios: Iron and Steel 

Table 43: CEF advanced case projections for the iron and steel industry 

1997 Advanced Case 2020 Advanced Case 

Consumption 

(quadrillion Btu) cccc 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 0.118 7% 0.020 2% 

Natural gas 0.529 31% 0.336 27% 

Coal 0.873 52% 0.758 60% 

Delivered electricity 0.173 10% 0.140 11% 

Total 1.693 100% 1.254 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -2.0% 

Overall % change in energy use (1997-2020) -26.0% 

The economic assumptions underlying the CEF advanced case projections are unchanged from 

the business-as-usual assumptions (annual steel production increase of 0.9 percent per year 

and growth in the economic value of the industry’s output at 0.9 percent per year). Under its 

advanced energy scenario, CEF projects that EAF steel production will increase to 55 percent of 

the market by 2020, compared to 46 percent under the reference scenario. Retrofit measures 

implemented under the advanced case reduce energy consumption in the following processes: 

blast furnace (injection of pulverized coal and natural gas, blast furnace gas recovery, improved 

control systems); EAF steelmaking (scrap preheating, improved process control with neural 

networks, DC-Arc furnace); cold rolling (automated monitoring and targeting systems, heat 

recovery on the annealing line); hot rolling (process controls, recuperative burners, energyefficient drives in the rolling mill); casting (efficient ladle preheating); cokemaking (programmed 

heating).dddd Energy savings are also produced by increased adoption of new process 

technologies such as alternative ironmaking and near net shape casting. Advanced case 

assumptions common to all sectors include increased boiler efficiencies and commercial 

building efficiency. 

The CEF advanced case projections likely overstate potential energy savings available under an 

optimal energy scenario, as EAF steelmaking already comprises 55 percent of production. In 

addition, many of the technologies noted above are already widely adopted in the industry, and 

industry restructuring since 2000 has resulted in further decreases in the energy intensity of 

U.S. steelmaking. At the same time, increased adoption of energy-efficient technologies and 

new technology development would be expected to accelerate the industry’s current trend of 

decreased energy consumption. 

cccc As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel 

consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF 

analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as 

compared with the reference case. 

dddd Retrofit measures are a partial list of those contained in Appendix A-2, Industry: NEMS Input Data and Scenario Input, of 

the Clean Energy Future report, pp. A-2.70-71. 

U.S. Environmental Protection Agency 3-63 March 2007 
Sector Energy Scenarios: Iron and Steel 

Environmental Implications 

The reductions in fossil fuel consumption that are achieved under the advanced energy scenario 

would lead to reductions in energy-related CAP emissions at the facility level, particularly sulfur 

dioxide and nitrogen oxides. CAP emissions reductions at the electric power generation level 

would also be expected from reductions in purchased electricity. 

Under the advanced energy scenario, by 2020 CEF projects carbon emissions by the iron and 

steel industry to fall 27 percent from 1997 levels, which is roughly equivalent to the projected 

decline in sector energy usage. 

3.6.3 Other Reference Materials Consulted 

American Iron and Steel Institute. “Duty-Sharing Byrd Amendment Repealed,” Steel Works. December 21, 2005. Internet source. 

Available at: 

http://www.steel.org/AM/Template.cfm?Section=Public_Policy&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=12412. 

American Iron and Steel Institute. Letter to Members of the Senate staff assigned to environment issues. September 12, 2005. 

Available at 

http://www.steel.org/AM/Template.cfm?Section=Public_Policy&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=11860. 

Considine, T., Jablonowski, T. and Considine, D. The Environment and New Technology Adoption in the U.S. Steel Industry. 

May 2001. 

L. Price, E. Worrell, and M. Khrushch, Lawrence Berkeley National Laboratory. Sector Trends and Driving Forces of Global 

Energy Use and Greenhouse Gas Emissions: Focus in Industry and Buildings. [LBNL-43746]. September 1999. Analysis 

conducted with support from EPA’s Climate Protection Division, Office of Air and Radiation, and through the U.S. Department of 

Energy. 

U.S. Department of Energy. Energy and Environmental Profile of the U.S. Iron and Steel Industry. August 2000. 

U.S. Department of Energy. Steel Industry Technology Roadmap. Internet source. Available at 

http://www.eere.energy.gov/industry/steel/roadmap.html. 

U.S. Department of Energy. Dilute Oxygen Combustion System. 1999. Available at 

http://www.eere.energy.gov/industry/steel/pdfs/doc_system.pdf. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency. New Source Review: Report to the President. June 2002. 

U.S. Environmental Protection Agency. Fact Sheet: Proposed Amendments to Air Toxics Standards for Integrated Iron and Steel 

Manufacturing. 2005. Available at http://www.epa.gov/ttn/oarpg/t3/fact_sheets/29951factsheet.pdf. 

U.S. Environmental Protection Agency. Economic Impact Analysis of Final Integrated Iron and Steel NESHAP: Final Report. 

2002. Available at http://www.epa.gov/ttnecas1/regdata/EIAs/I&S_EIA_Final_1202.pdf. 

U.S. Geological Survey. Iron and Steel Statistics and Information. Available at 

http://minerals.usgs.gov/minerals/pubs/commodity/iron_&_steel/. 

E. Worrell, N. Martin, and L. Price. Energy Efficiency and Carbon Dioxide Emissions Reduction Opportunities in the U.S. Iron and 

Steel Sector. July 1999. 

Q. Zhang. “A Comparison of the United States and Chinese Steel Industries,” Perspectives, Vol. 3, No. 6. 2001. 

U.S. Environmental Protection Agency 3-64 March 2007 
Sector Energy Scenarios: Metal Casting 

3.7 Metal Casting 

3.7.1 Base Case Scenario 

Situation Assessment 

The metal casting industry (NAICS 3315) is a 

diverse industry that plays a critical role in 

U.S. manufacturing, as more than 90 percent 

of all manufactured goods in the United States 

contain cast metal components.209 

There are approximately 2,300 metal 

casting facilities in the United States, 

including both ferrous and nonferrous 

(primarily aluminum) foundries and die 

casting facilities.210 Most metal casting 

shops are small, independently owned 

facilities that perform on a contract basis, 

though some “captive” foundries are part of 

larger manufacturing operations.eeee DOE 

data indicate that approximately 70 percent 

of sector energy use is by independent 

metal casting facilities and 30 percent is by 

captive foundries.211 The industry is 

dominated by small “job-shop” businesses; 

80 percent of metal casting facilities employ 

100 people or less.212 The sector is also 

varied due to differences in the metals 

being melted, alloying requirements, 

product specifications, casting processes 

used, capacity of operations, etc. Though 

metal casting facilities are found 

nationwide, ten states account for more 

than 80 percent of the industry’s shipments: 

Ohio, Indiana, Wisconsin, Alabama, 

Michigan, Pennsylvania, Illinois, 

Tennessee, California, and Texas.213 

The metal casting sector currently 

participates in EPA’s Sector Strategies 

Program. 

In recent years, the metal casting sector has 

Recent Sector Trends Informing the Base Case 

Number of facilities: ↓

Value added and value of shipments: ↓

Energy intensity: ↓

Major fuel sources: Natural gas, purchased electricity 

Current economic and energy consumption data are 

summarized in Table 44 on page 3-66. 

Voluntary Commitments 

The metal casting sector participates in DOE’s Industries of the 

Future (IOF)/Industrial Technologies Program (ITP) as an 

“Energy Intensive Industry.” ITP’s goals for all energy intensive 

sectors include the following: 

 Between 2002 and 2020, contribute to a 30 percent 

decrease in energy intensity. 

 Between 2002 and 2010, commercialize more than 10 

industrial energy efficiency technologies through research, 

development & demonstration (RD&D) partnerships. 

The program has identified best practices for melting and other 

efficiency improvement opportunities in the sector that could 

result in energy savings and CO2 emission reductions. Specific 

energy reduction techniques identified include the following: 

 Replacing heel melting furnaces used for iron production 

with modern batch melters. 

 Improving casting yield. 

 Applying existing air/natural gas mixing methods to reduce 

ladle heating energy. 

Industry participation in the program is managed by the Cast 

Metals Coalition, which in 1998 set measurable goals for 2020, 

including using 20 percent less energy to produce castings, 

compared to the sector’s 1998 energy requirements of 320 

trillion Btus. See 

http://www.eere.energy.gov/industry/metalcasting/ and 

http://cmc.aticorp.org/. 

experienced a downturn in part due to international competition and declines in the automobile 

industry. Out of all sectors considered in this analysis, the metal casting industry had the largest 

annual decrease in value added and value of shipments from 1997 to 2004 (see Table 44). At the 

same time, recent forecasts indicate an improved economic outlook for the sector in the future. By 

2008 metal castings sales are projected to increase 15 percent from 2005 levels, and metal 

casting shipments are expected to be 8 percent higher than 2004 levels.214 From 2003 to 2004, 

eeee According to the DOE analysis, Theoretical/Best Practice Energy Use in Metalcasting Operations (2004), energy data that 

rely on NAICS classifications (as do the sources used in this report) fail to capture energy use by colocated facilities. 

U.S. Environmental Protection Agency 3-65 March 2007 
Sector Energy Scenarios: Metal Casting 

the industry’s value of shipments grew by more than 7 percent.215 Growth in the production of light 

metals is expected to continue, in part due to transportation industry trends. 

Profit margins in the industry are generally small and combined with the small average business 

size, suggest that companies have limited financial resources at their disposal, particularly for 

R&D initiatives that involve high costs, long investment horizons, and uncertain outcomes. At 

the same time, R&D is essential to maintaining the industry’s position in an increasingly 

competitive global marketplace. DOE notes that casting processes must continually evolve to 

meet increasing demand for lighter-weight, higher-strength castings.216 Thus, public/private R&D 

partnerships are essential to ensuring the long-term health and productivity of the industry. 

DOE’s Industrial Technologies Program partners with the Cast Metals Coalition (representing 80 

percent of the industry) and university researchers to develop transformational technologies that 

seek to reduce metal casting energy intensity (energy consumption per ton of production) by 20 

percent by 2020.217 Given the industry’s limited financial resources, a recent DOE analysis 

suggests that the most promising technology advancements offer less capital-intensive energysavings opportunities, such as retrofits aimed at increasing the efficiency of existing furnaces.218 

The metal casting industry is heavily dependent on natural gas and purchased electricity, and 

growing interest in energy efficiency has been driven by the impacts of natural gas price 

volatility.219 According to DOE, most of the sector’s energy use (approximately 55 percent of 

total energy costs) can be attributed to the melting of metals, but moldmaking and coremaking 

also utilize significant amounts of energy. Being one of the most energy-intensive industries in 

the United States, reducing energy usage is a primary goal for the sector.220 

The table below summarizes economic and energy consumption data presented in Chapter 2. 

Table 44: Current economic and energy data for the metal casting industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

-3.2% -5.4% -2.4% -3.7% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

10.3 5.6 8.0% 4.6% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Natural Gas Net Electricity Coke & Breeze 

49% 34% 15% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 20% 

LPG Fuel Oil Electricity 

Fraction of natural gas inputs that could be 

met by alternate fuels 

73% 13% 13% 

U.S. Environmental Protection Agency 3-66 March 2007 
Sector Energy Scenarios: Metal Casting 

Expected Future Trends 

As the CEF report does not address the metal casting sector, we are unable to present detailed 

energy consumption projections for this industry. DOE analysis conducted in 2003 projected 

that industry-wide energy consumption would increase through 2009 in response to increasing 

production.221 Nonferrous casting shipments are growing due to increased demand for lighter 

metals (for example, in the transportation industry and for the U.S. military). According to DOE, 

aluminum casting production comprised 36 percent of sales and 34 percent of industry energy 

consumption in 2003, and energy use in the typical aluminum casting facility is 381 percent 

greater per ton of metal produced than is typical for iron casting operations.

222 DOE site visits 

indicated that inefficient melting and holding operations were common in aluminum casting 

facilities. 

As with other energy-intensive industries (iron and steel, forest products), a gradual decrease in 

energy consumption per ton of production is expected for the metal casting industry. Though 

efforts to control energy costs are expected to drive incremental investment in energy efficiency, 

capital constraints are likely to limit the rate of energy efficiency improvement. 

Environmental Implications 

Figure 18: Metal casting sector: energy-related CAP emissions 

Metal Casting Sector: 

NEI CAP Emissions 

(Total: 73,000 tons) 

Energyrelated 

7% 

All other* 

93% 

Source: Final v1 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Metal Casting Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 5,200 tons) 

CO 

34% 

NOX 

44% 

NH3 

<1% 

VOC 

4% 

PM10 

3% 

SO2 

15% 

Source: Final v1 2002 NEI 

Figure 18 compares NEI data on energy-related 

CAP with non-energy-related CAP emissions for Effects of Energy-Related CAP Emissions 

the metal casting industry. According to the SO2 and NOx emissions contribute to respiratory illness 

figure, energy-related CAP emissions comprise and may cause lung damage. Emissions also 

a relatively small fraction of total CAP emissions. contribute to acid rain, ground-level ozone, and 

However, purchased electricity meets more than reduced visibility. 

30 percent of the sector’s energy demand. As 

NEI data attribute emissions associated with electric power generation to the generating source 

rather than the purchasing entity, NEI data underestimate energy-related CAP emissions for this 

sector. 

U.S. Environmental Protection Agency 3-67 March 2007 
Sector Energy Scenarios: Metal Casting 

Figure 19: Metal casting sector: CAP emissions by source category and fuel usage 

Metal Casting Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 5,200 tons) 

Natural Gas 

60% 

All Others 

5% 

Distillate Oil 

6% 

Coal 

14% 

Gasoline 

7% 

Coke 

8% 

Source: Final v1 2002 NEI 

Metal Casting Sector: 

Energy-Related CAP Emissions by Source 

(Total: 5,200 tons) 

Industrial 

Processes 

39% 

Internal 

Combustion 

Engines 

12% 

External 

Combustion 

Boilers 

48% 

Petroleum 

and Solvent 

Evaporation 

1% 

Source: Final v1 2002 NEI 

Figure 19 presents NEI data on energy-related CAP emissions by source category and fuel 

type. Though the largest fraction of energy-related CAP emissions is from external combustion 

boilers, process-related energy inputs are also substantial. As noted previously, NEI data 

classifications are problematic due to reporting inconsistencies, but equipment classified under 

“industrial processes” likely includes melting and holding furnaces that may be fired with coke, 

natural gas, or electricity.223 (Cupola melting furnaces are used in ferrous metal casting and are 

mostly fired with coke. Holding furnaces are used to maintain the temperature of molten metal 

before input into pouring lines.) Other energy-using equipment that is likely classified as 

process-related includes equipment used in moldmaking, coremaking, and post-casting 

activities. 

Due to the energy-intensive nature of processes related to melting metals (which represent 55 

percent of total energy consumption), DOE notes that substantial energy-savings opportunities 

lie with energy efficiency improvements in this area—not only to the melting furnace itself, but 

also in terms of equipment used for metal preparation and pretreatment, refining and treatment 

of molten metals, molten metal holding, and molten metal tapping and transport.224 At the same 

time, onsite emissions of energy-related CAPs are small compared with other sectors 

considered in this analysis—approximately 5,000 tons per year compared with more than 

700,000 tons per year for the chemical manufacturing industry. 

3.7.2 Best Case Scenario 

Opportunities 

Table 45 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 45: Opportunity assessment for the metal casting industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low The sector remains heavily dependent on natural gas and electricity, and shows little fuelswitching potential. Natural gas is likely to remain important in part due to the growth of the 

nonferrous casting segment of the sector (particularly aluminum casting), which prefers 

natural gas-driven melting technologies.225 

U.S. Environmental Protection Agency 3-68 March 2007 
Sector Energy Scenarios: Metal Casting 

Opportunity Ranking Assessment (including potential barriers) 

Increased CHP Low An extensive analysis of CHP opportunities conducted on behalf of DOE indicated little 

potential for CHP in the metal casting industry, primarily on the basis of cost 

effectiveness.226 However, there is potential for increased utilization of waste heat energy 

through technologies such as heat recuperators, which use heat from exhaust gases to 

heat incoming combustion air. 227 

Equipment retrofit/ 

replacement 

Medium The financial barriers in this industry indicate that retrofitting existing technology may be a 

more viable opportunity for the industry than equipment replacement. In iron metal casting, 

cupola melting efficiency can be improved with retrofits such as replacing gas-fired hot 

blasts with recuperative hot blasts, or installing variable speed/frequency drives on large 

motors. 228 Installation of automated temperature and power controls is another energysavings opportunity available in multiple melting-related applications. 

As with retrofits, the greatest energy-savings opportunities from equipment replacement lie 

with equipment used in melting processes. For iron metal casting, replacing heel melting 

furnaces with modern batch melters is one such opportunity. A DOE analysis estimates 

that heel melters account for 60 percent of ductile iron and gray iron induction furnaces 

used by industry in 2003.229 For aluminum metal casting, there are substantial energysavings opportunities from replacing inefficient reverberatory furnaces with best practice 

stack melters.230 

Process 

improvement 

Medium There are also energy-savings opportunities through process improvement in ferrous and 

nonferrous metal casting operations, e.g., implementation of energy management best 

practices, optimizing scheduling (continuous melting), scrap cleaning, and improving 

casting yield.231 

R&D Medium DOE notes that given the energy requirements of melting processes, development of 

advanced melting technologies is an area of substantial energy-savings potential for the 

metal casting industry. Developing technologies that involve retrofits to existing furnaces 

rather than furnace replacement are most likely to be adopted, in part because retrofits 

may avoid permitting requirements, and also because they are typically less capital 

intensive. Developing retrofit technologies with substantial energy-savings potential noted 

by DOE include the following: oxygen-enriched fuel combustion, charge preheating, 

molten metal delivery, and heat recovery from flue gases. Other promising R&D 

opportunities noted by DOE include the following: (1) new furnace designs that allow 

greater scheduling flexibility and reduced energy losses in batch melting processes; (2) 

technologies for increased waste heat recovery; (3) technologies to promote wider 

applicability of induction furnaces; (4) continued development of experimental melting 

furnace technologies, including Isothermal Melting Technologies; and (5) technologies that 

translate ladle metallurgy furnaces used in wrought steel and aluminum ingot industries to 

the smaller capacities used in metal casting.232 

DOE notes that the greatest barriers to implementation of advanced melting technologies 

include the following: (1) composition of the industry (primarily small businesses) increases 

reluctance to take on the risks and costs associated with developing and implementing 

new technologies, and also means that smaller facilities may not be able to take 

advantage of energy-savings opportunities that are cost effective for larger-scale 

operations; (2) declining profit margins reduce investment capacity; (3) the diversity of the 

industry limits the applicability of cross-cutting technologies, meaning there is no “onesize-fits-all” approach to promoting energy efficiency improvement; and (4) new furnace 

technologies that require new/expanded exhaust systems may be subject to state and 

local permitting requirements.233 

Optimal Future Trends 

As no energy use projections are available for the metal casting industry, it is not possible to 

compare a business-as-usual energy scenario with an optimal energy scenario. Through 

research and development on technologies that will transform metal casting energy use, DOE’s 

goal is to achieve a 20 percent reduction in the energy required to produce a ton of product by 

2020.234 An environmentally preferable energy scenario for the industry would primarily involve 

faster energy efficiency retrofit and replacement rates for existing equipment used in melting 

processes, increased adoption of best energy management practices, and increased investment 

in R&D. 

U.S. Environmental Protection Agency 3-69 March 2007 
Sector Energy Scenarios: Metal Casting 

Environmental Implications 

Improvements in melting furnace efficiency would reduce onsite emissions (both GHG and 

CAP) stemming from fuel inputs of natural gas and coke. Energy efficiency improvement in 

cupola melting furnaces—which utilize coke as the primary fuel—would reduce a particularly 

emissions-intensive (both in terms of GHG and CAP emissions) energy consumption process. 

Reductions in electricity consumption (which currently meets over a third of the sector’s energy 

needs) through increased energy efficiency would have a magnified impact on energy-related 

CAP and GHG emissions at the utility level due to the magnitude of energy losses during 

electric generation and transmission. As noted previously, CAP emissions reductions would 

affect regional air quality, while GHG emissions reductions would have a global impact. 

3.7.3 Other Reference Materials Consulted 

American Foundry Society. Metal Casting Forecast & Trends; Stratecasts, Inc., Demand & Supply Forecast. 2002. 

American Foundry Society. Facts & Figures about the U.S. Foundry Industry. Available at http://www.afsinc.org/Trends.htm. 

Cast Metals Coalition. Metalcasting Industry Technology Roadmap: Pathway for 2002 and Beyond. 2003. 

U.S. Department of Energy. Energy and Environmental Profile of the U.S. Metalcasting Industry. Analysis prepared by 

Energetics Incorporated. 1999. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency 3-70 March 2007 
Sector Energy Scenarios: Metal Finishing 

3.8 Metal Finishing Recent Sector Trends Informing the Base Case 

3.8.1 Base Case Scenario Number of facilities: ↓

Situation Assessment Value of shipments: ↓

Electricity energy intensity: ↑

A subset of the fabricated metal products 

industry, metal finishing (NAICS 332813) Major fuel sources: Electricity, natural gas, petroleum 

encompasses a variety of surface finishing and Current economic and energy consumption data are 

electroplating operations that coat an object with summarized in Table 46 on page 3-72. 

one or more layers of metal to improve 

resistance to wear and corrosion, alter the 

appearance, control friction, or impart new physical properties or dimensions. This diverse 

sector is composed of approximately 2,900 facilities, most of which are small, independently 

owned facilities that employ 50 or fewer people.235 The industry is geographically concentrated 

in highly industrialized areas of California, Texas, and the Great Lakes states.236 

The metal finishing industry participates in EPA’s Sector Strategies Program. 

The sector faces economic pressures from foreign competition and declines in the U.S. 

automobile industry, experiencing an 11 percent decline in the number of facilities since 2000, 

and a 21 percent reduction in the number of employees.237 Profit margins in the industry are 

generally small, which, combined with the small average business size, means that metal 

finishing companies have limited financial resources at their disposal. From 1997 to 2004 the 

sector experienced no growth in value added and a small annual decline in value of shipments 

(see Table 46).ffff 238 According to the organization Energy Industries of Ohio, electroplating 

operations have been particularly hard hit by rising production costs and the pressures of 

foreign competition that keep product prices down. In response, the electroplating industry 

shows a general trend of moving overseas.239 

Between 2002 and 2004, electricity represented approximately half of the industry’s energy 

costs, with purchased fuels (a large percentage of which was natural gas) comprising the 

remaining portion.240 Different types of metal finishing operations have different energy 

requirements; though some operations use relatively more direct fossil fuel inputs, electroplating 

operations are electricity intensive. Since Census Bureau data from the Annual Survey of 

Manufacturers (ASM) do not provide the annual amount of energy produced from purchased 

fuels, it is not possible to calculate the total energy intensity of the metal finishing industry, 

though it is possible to calculate electric intensity (kWh/dollar value of shipments). Industry-wide 

electric intensity increased by approximately 3 percent from 1998 to 2004.241 

The National Metal Finishing Strategic Goals Program (SGP), a voluntary environmental 

partnership between EPA and several metal finishing trade associations that focuses on 

electroplating operations, collected energy intensity data (thousand Btu/dollar of sales) from 

program participants. According to these data, energy intensity remained relatively steady from 

1998 to 2003, increasing by just 0.07 percent over the period, with year-to-year fluctuations that 

may be attributable to economic production trends and variations in the number of companies 

reporting data. Additionally, an independent third-party, the National Center for Manufacturing 

Sciences, tracked the progress of 150 participating metal finishers that consistently reported 

ffff U.S. Census Bureau data on the industry’s value added and value of shipments from the Annual Survey of Manufacturers 

covers a broader NAICS category (NAICS 3328: coating, engraving, heat treating, & allied activities) than the metal finishing 

industry. 

U.S. Environmental Protection Agency 3-71 March 2007 
Sector Energy Scenarios: Metal Finishing 

their environmental progress. Through 2001, cumulative improvements for these facilities 

included a 7 percent reduction in energy use, normalized by dollar value of sales.242 The 

differences in electricity intensity (ASM data) and energy intensity (SGP data) are in part 

attributable to the fact that the SGP energy intensity metric includes both electric and fuel 

energy inputs. Also, ASM data represent a larger cross-section of the metal finishing industry, 

as SGP data are primarily from electroplaters.243 

In general, most current efforts at improved energy efficiency and technology adoption in the 

metal finishing sector are being driven by customer demand. These may take the form of 

improved environmental performance (such as ISO 14001 certification), which requires 

modification to existing processes, or lower-cost products, which requires efficiency of 

operations and inputs, including energy. Many of the emerging technologies that offer energy 

efficiency improvement opportunities for the metal finishing sector focus on waste reduction in 

existing processes and substitutes to current electrochemical processes. At the same time, 

metal finishing companies have little in-house technical expertise and tend to rely heavily on 

their equipment suppliers for information.244 There are clear energy efficiency opportunities 

available to the metal finishing industry, but given the economic pressures on the industry, it 

seems most likely that improvement may come from retrofitting existing technologies with more 

efficient equipment, as opposed to wholesale process changes.245 

Table 46 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 46: Current economic and energy data for the metal finishing industrygggg 

Economic Production Trendshhhh 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

0.1% -1.2% -0.3% -2.0% 

Energy Intensity in 2002iiii 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

NA NA 6.7% 4.0% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)jjjj 

Natural Gas Net Electricity Fuel Oil 

54% 42% 2% 

gggg No fuel-switching data are available for this sector. 

hhhh Economic data are for the larger NAICS category of coating, engraving, heat treating, & allied activities (NAICS 33281). 

iiii Energy intensity data are for the larger NAICS category of coating, engraving, heat treating, & allied activities (NAICS 

33281). 

jjjj Fuel use data are for the larger NAICS category of fabricated metal products (NAICS 332). 

U.S. Environmental Protection Agency 3-72 March 2007 
Sector Energy Scenarios: Metal Finishing 

Expected Future Trends 

No energy projections are available for the metal finishing industry. The “metals-based 

durables” sector is one of the industrial sectors modeled in the CEF report and by AEO 2006, 

and includes the following industries: fabricated metal products, machinery, electric and 

electronic equipment, transportation equipment, and instruments and related products. Though 

we do not present a full analysis of CEF and AEO 2006 projections as we do for other sectors, it 

is helpful to consider the metals-based durables projections in terms of extrapolating what future 

energy trends are likely to be for the metal finishing industry. Further complicating efforts to 

predict future energy consumption trends for the metal finishing industry is the heterogeneous 

nature of the sector itself. For instance, trends for electricity-intensive segments of the industry 

(like electroplating) may differ from trends in segments that rely more heavily on natural gas. 

Under the reference scenario for the metals-based durables industry, CEF and AEO 2006 

project no major fuel mix changes through 2020, as the industry remains dependent on natural 

gas and purchased electricity. In general, there is little opportunity for the metal finishing 

industry to replace electricity and natural gas inputs with less expensive fuels, and we do not 

anticipate any future fuel-switching trends for the metal finishing industry. 

As is the case with CEF projections, AEO 2006 projects substantial growth in economic 

production for the metals-based durables industry through 2020, with the value of shipments 

increasing 60 percent from 2004 levels. Energy consumption grows by 30 percent over the 

same period, and energy intensity (energy consumption per dollar value of shipments) declines 

by 1.2 percent per year. Though subsets of the industry like metal finishing may be unlikely to 

experience the same degree of growth (particularly given recent shifts towards overseas 

production), some increase in energy consumption may result from increasing production. 

Environmental Implications 

Figure 20: Metal finishing sector: energy-related CAP emissions 

Metal Finishing Sector: 

NEI CAP Emissions 

(Total: 400 tons) 

Energyrelated 

29% 

All other* 

71% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Metal Finishing Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 100 tons) 

VOC CO

10% 

SO2 

64% PM10 

<1% 

NOX 

25% 

1% 

Source: Draft 2002 NEI 

Figure 20 compares NEI data on energy- Effects of Energy-Related CAP Emissions related CAP emissions with non-energyrelated CAP emissions for the metal SO2 and NOx emissions contribute to respiratory illness 

finishing sector. According to the figure, and may cause lung damage. Emissions also 

energy-related CAP emissions are a contribute to acid rain, ground-level ozone, and 

relatively moderate fraction of all CAP reduced visibility. 

emissions; however, NEI data attribute 

emissions from electric power generation to the generating source rather than the purchasing 

U.S. Environmental Protection Agency 3-73 March 2007 
Sector Energy Scenarios: Metal Finishing 

entity. Given that purchased electricity supplies approximately half of the sector’s energy needs, 

NEI data underestimate energy-related CAP emissions for this sector. At the facility level, 

almost 90 percent of energy-related emissions are sulfur dioxide and nitrogen oxides. On a ton 

basis, the metal finishing sector’s energy-related CAP emissions at the facility level are 

relatively small compared with energy-related CAP emissions by other sectors (see Table 13). 

Figure 21: Metal finishing sector: CAP emissions by source category and fuel usage 

Metal Finishing Sector: 

Energy-Related CAP Emissions by Source 

(Total: 100 tons) 

External 

Combustion 

Boilers 

90% 

Industrial 

Processes 

8% 

Internal 

Combustion 

Engines 

2% 

Source: Draft 2002 NEI 

Metal Finishing Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 100 tons) 

Distillate Oil 

77% 

Natural Gas 

23% 

Source: Draft 2002 NEI 

Figure 21 presents NEI data on the sources of energy-related CAP emissions shown in Figure 

20. The metal finishing industry is a relatively minor source of onsite energy-related CAP 

emissions compared with other sectors considered in this analysis—only 100 tons per year 

compared with more than 700,000 tons per year for the chemical manufacturing industry. 

Ninety percent of energy-related emissions are associated with external combustion boilers, 

with distillate oil contributing to roughly two-thirds of energy-related emissions, and natural gas 

contributing the remaining third. Given that fuel oil supplies around 2 percent of the sector’s 

energy requirements, the large fraction of energy-related emissions arising from fuel oil use is 

most likely attributable to NEI data reporting errors. 

Increases in sector energy consumption would affect energy-related CAP emissions at the 

electric power generation level, as well as at the facility level through increased consumption of 

natural gas and petroleum-based fuels. The geographic dispersion of the metal finishing 

industry and the relatively small volume of energy-related CAP emissions compared with other 

sectors included in this analysis indicate that energy trends are unlikely to have a substantial 

impact on regional air quality. 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 157 million metric tons for the metals-based durables 

industry in 2004. (Carbon dioxide emissions from the metal finishing sector represent a fraction 

of these emissions.) AEO 2006 projects that by 2020 the metals-based durables industry’s 

carbon dioxide emissions will increase by 25 percent. As discussed previously, a smaller rate of 

increase in carbon dioxide emissions would be expected for the metal finishing industry, given 

that energy consumption will likely increase at a slower rate than in the larger metals-based 

durables sector. 

U.S. Environmental Protection Agency 3-74 March 2007 
Sector Energy Scenarios: Metal Finishing 

3.8.2 Best Case Scenario 

Opportunities 

Table 47 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 47: Opportunity assessment for the metal finishing industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low The sector remains heavily dependent on electricity and natural gas and shows little fuelswitching trend. 

Increased CHP Medium Given that many metal finishers use electric energy in the electroplating stage and 

thermal energy in heating the plating solution baths, small onsite generators that run on 

natural gas and have CHP capabilities may be cost effective for some businesses. Low 

NOx, high-efficiency generators are offered by a number of manufacturers. 

Local and state permitting requirements to install these devices may pose a potential 

barrier to implementation.246 New CHP installations also face barriers in terms of utility 

rates and interconnection requirements if electricity production is expected to exceed 

onsite demand, and also from NSR/PSD permitting.

247 

Equipment retrofit/ 

replacement 

Medium The financial barriers in this industry indicate that retrofitting (versus replacing) existing 

technology with state-of-the-art equipment is likely to provide ongoing efficiency 

improvement. Facilities may also improve their efficiency by upgrading existing lighting 

and improving their HVAC systems. 

Process 

improvement 

High Multiple process improvement opportunities exist in metal finishing, including using more 

efficient rinsing techniques and optimizing plating bath temperatures through adding 

insulation and using timers. Process optimization may have greater potential for adoption 

due to relatively low associated costs. 

R&D Medium Several technologies in development could improve the energy efficiency of metal 

finishing processes, including metal powder coating, thermal spray, and sputtering 

technologies. Advanced wastewater treatment processes involving ion exchange and 

permeable membrane technologies may also produce future opportunities for energy 

savings. 

The industry is also looking at the substitution of non-cyanide-based plating solutions in 

place of cyanide solutions, which create costly and energy-intensive waste treatment 

issues.248 

Optimal Future Trends 

An optimal energy scenario for the metal finishing industry would involve increased energy 

efficiency through increased penetration of CHP applications, energy-efficient equipment, and 

process improvements, as well as increased investment in the development of new energyefficient technologies and processes. 

Given that CEF’s projections for the metal-based durables industry are not particularly 

applicable to the metal finishing sector, we have not included a full summary of CEF’s advanced 

case projections in this analysis, but the projections show relatively little change in the sector’s 

fuel mix, a decrease in energy intensity of 2 percent per year (compared with the reference case 

projection of an annual decline of 0.7 percent), and an increase in energy consumption of 20 

percent (compared with the reference case projection of a 60 percent increase). 

U.S. Environmental Protection Agency 3-75 March 2007 
Sector Energy Scenarios: Metal Finishing 

Environmental Implications 

Energy efficiency increases in the metal finishing sector would affect energy-related CAP and 

carbon emissions at both the electric power generation level and the facility level. Increased 

CHP would shift energy-related emissions from the electric power generation level to the facility 

level to some degree. In cases where electric power supply is produced by fossil fuel-fired 

power plants (which have the highest power generation losses), such a shift would produce the 

greatest decrease in total energy-related emissions, recognizing that emissions may actually 

increase at the facility level as power is produced onsite. However, such effects would vary 

according to local energy inputs for electric power generation. Energy efficiency improvements 

could also reduce natural gas and petroleum consumption, affecting energy-related CAP and 

carbon emissions at the facility level. NEI data indicate that sulfur dioxide and nitrogen oxide 

emissions would be most impacted by such efficiency gains. 

Achieving an optimal energy scenario may be relatively more difficult for the metal finishing 

sector given current financial pressures and the number of small, geographically dispersed firms 

that comprise the industry. 

3.8.3 Other Reference Materials Consulted 

Angstrom Sciences. Sputtering Technology – The Process. 2006. Internet source. 

Hannapel, Jeff, The Policy Group. Personal communication with U.S. Environmental Protection Agency point of contact for the 

metal finishing industry. February 10, 2006. 

Karthikeyan, J. 2004. Cold Spray Technology: International Status and US Efforts, ASB Industries. Available from 

http://www.asbindustries.com/articles/Int_Status_Report.pdf; Internet; Accessed Feb. 11, 2006. 

“What is Powder Coating?” Finishing.com. Internet source. Available at http://www.finishing.com/Library/pennisi/powder.html. 

Encyclopedia of American Industries: Fabricated Metal. Internet source. Available at 

http://www.referenceforbusiness.com/industries/Fabricated-Metal/index.html. 

National Metal Finishing Resource Center. Internet source. Available at http://www.nmfrc.org/. 

U.S. Census Bureau. County Business Patterns. Internet source. Available at 

http://www.census.gov/epcd/cbp/view/cbpview.html. 

U.S. Census Bureau. Manufacturing, Mining & Construction Statistics, Annual Survey of Manufacturers. 2002. Available at 

http://www.census.gov/mcd/asmhome.html. 

U.S. Environmental Protection Agency. Profile of the Metal Finishing Industry. 2002. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency 3-76 March 2007 
Sector Energy Scenarios: Motor Vehicle Manufacturing 

3.9 Motor Vehicle Manufacturing Recent Sector Trends Informing the Base Case 

3.9.1 Base Case Scenario Number of facilities: ↓

Situation Assessment Value of shipments: ↑

Electricity intensity: ↓

This report looks at motor vehicle manufacturing 

operations—specifically facilities that assemble Major fuel sources: Electricity, natural gas 

finished automobiles and light duty vehicles from Current economic and energy consumption data are 

premanufactured automotive parts including the summarized in Table 48 on page 3-78. 

engine, chassis components, and wheels and 

tires (NAICS 33611).249 The assembly process 

generally includes stamping, body welding, general assembly, and painting. 

According to data published by the Alliance of Automobile Manufacturers, in 2006 there were 61 

assembly plants for automobiles and light duty trucks operating in 21 states, with Michigan, 

Ohio, Indiana, Illinois, and Missouri among the states with the most manufacturing facilities.250 

Over the last 20 years, production has gradually shifted south, with new plants opening in 

central Tennessee in the 1980s, and in Alabama, Mississippi, and South Carolina in the 

1990s.251 

In terms of the dollar value of production, the automobile industry is the largest industry in the 

United States.252 The industry’s value added declined slightly from 1997 to 2004, but value of 

shipments increased by a small annual amount (see Table 48). However, the economic data 

also show substantial interannual variation, and larger annual increases in value added from 

2000 to 2004. 253 U.S. automakers face pressure from foreign competitors, which have an 

increasing manufacturing presence in this country. The Big Three North American Original 

Equipment Manufacturers (OEMs)—General Motors, Ford, and DaimlerChrysler—are reacting 

to declining sales figures and economic strain by closing certain plants and downsizing their 

companies. Ford announced in January 2006 that it would be closing 14 North American 

manufacturing plants and cutting 18 to 21 percent of employees. GM is following suit with 12 

plant closings and a 30,000 job cut through 2008. 

The majority of sector energy demand is met by electricity, with natural gas and other 

purchased fuels meeting the remainder. Energy expenditures comprise approximately 1 percent 

of total vehicle production costs.254 Major end uses of electricity include painting systems (27-50 

percent), facility lighting and HVAC (26-36 percent), compressed air (9-14 percent), and welding 

(9-11 percent). Fuels generate hot water and steam used in paint booths and heat in the curing 

ovens used to dry paint.255 The amount of energy used in painting systems is affected by VOC 

control requirements. Low-VOC powder paints (including anti-chip primers, clear coats, and 

lacquers) have been developed that rely on the electrostatic attraction between the powder and 

the vehicle to deposit the coating onto the surface.256 Though powder paints may require more 

heat in the curing process, by eliminating solvents, less energy is required for ventilation, 

pollution control, paint application, and paint gun cleaning. In addition, manufacturing powder 

paints is slightly less energy intensive than solvent paints, resulting in additional indirect energy 

savings.257 At the same time, substituting powder-based coating for solvent-based coating 

cannot be accomplished without major capital-intensive process and equipment changes to the 

painting lines and operations. 

From 1998 to 2004, electricity purchases have ranged between 50 to 60 percent of total energy 

costs for the industry.258 Since Census Bureau data from the Annual Survey of Manufacturers 

do not provide the annual amount of energy produced from purchased fuels, it is not possible to 

calculate the total energy intensity of the motor vehicle manufacturing industry, though it is 

U.S. Environmental Protection Agency 3-77 March 2007 
Sector Energy Scenarios: Motor Vehicle Manufacturing 

possible to calculate electric intensity (kWh/dollar value of shipments), which fell by almost 9 

percent from 1998 to 2004. 

Table 48 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 48: Current economic and energy data for the motor vehicle manufacturing industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

-2.2% 1.9% 0.3% 0.1% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

NA NA 1.1% 0.3% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)kkkk 

Natural Gas Net Electricity Other 

48% 41% 7% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 18% 

Fuel Oil LPG Coal 

Fraction of natural gas inputs that could be 

met by alternate fuels 

50% 42% 11% 

Fuel-Switching Potential in 2002: Coal to Alternate Fuels 

Switchable fraction of coal inputs Withheld 

Natural Gas Fuel Oil Electricity 

Fraction of coal inputs that could be met by 

alternate fuels 

94% 14% 4% 

kkkk Fuel input and fuel-switching data are for the larger NAICS category, transportation equipment (NAICS 336). 

U.S. Environmental Protection Agency 3-78 March 2007 
Sector Energy Scenarios: Motor Vehicle Manufacturing 

Expected Future Trends 

Economic pressures on the motor vehicle 

manufacturing industry are expected to be Voluntary Commitments 

the primary motivation for efficiency Through Climate VISION, member companies of the Alliance of 

improvement, as the U.S. auto industry Automobile Manufacturers have committed to achieve at least a 

seeks to increase its competitive edge on 10% reduction in GHG emissions from their U.S. automotive 

the global market. A recent study predicts manufacturing facilities, based on U.S. vehicle production, by 

that the publicly traded companies that 2012 from a base year of 2002.a 

comprise the automotive industry may 

also be motivated to reduce the impacts 

of energy cost volatility by investing in efficiency.259 According to research conducted by the 

Lawrence Berkeley National Laboratory (LBNL), due to the complexity, process, and 

technological variation in the automotive assembly industry a wide array of opportunities exist 

for energy efficiency and pollution prevention for paint, welding, and cross-sector practices (e.g., 

utilities, lighting, stamping, etc.). However, given the relatively small fraction of total production 

costs that energy entails, efficiency improvement is likely to be incremental. No major shifts in 

fuel mix are anticipated. 

Environmental Implications 

Figure 22: Motor vehicle manufacturing sector: energy-related CAP emissions 

Motor Vehicle Assembly Sector: 

NEI CAP Emissions 

(Total: 49,000 tons) 

Energyrelated 

18% 

All other* 

82% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Motor Vehicle Assem bly Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 9,000 tons) 

CO 

28% 

PM10 

2% 

SO2 

25% 

NOX 

43% NH3 

<1% 

VOC 

2% 

Source: Draft 2002 NEI 

Figure 22 compares NEI data on energy-related Effects of Energy-Related CAP Emissions 

CAP emissions by pollutant type with total CAP 

emissions for the motor vehicle manufacturing SO2 and NOx emissions contribute to respiratory illness 

industry. The industry is a relatively minor source and may cause lung damage. Emissions also 

contribute to acid rain, ground-level ozone, and of onsite energy-related CAP emissions reduced visibility. compared with other sectors considered in this 

analysis—approximately 9,000 tons per year 

compared with more than 700,000 tons per year for the chemical manufacturing industry. 

As purchased electricity meets a substantial fraction of this sector’s energy needs, it is important 

to note that NEI data attribute emissions to the generating source rather than the purchasing 

entity, and thus underestimate energy-related CAP emissions for this sector. In terms of onsite 

energy generation, the largest emissions fractions are nitrogen oxides and sulfur dioxide. (As 

noted in Section 2.3.3, NEI data on carbon monoxide emissions appear higher than would be 

expected for stationary sources, so we do not address carbon monoxide data in our assessment 

of CAP emissions for each sector.) 

U.S. Environmental Protection Agency 3-79 March 2007 
Sector Energy Scenarios: Motor Vehicle Manufacturing 

Figure 23: Motor vehicle manufacturing sector: CAP emissions by source category and fuel usage 

Motor Vehicle Assembly Sector: 

Energy-Related CAP Emissions by Source 

(Total: 9,000 tons) 

External 

Combustion 

Boilers 

74% 

Industrial 

Processes 

8% Internal 

Combustion 

Engines 

9% 

Other 

9% 

Source: Draft 2002 NEI 

Motor Vehicle Assembly Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 9,000 tons) 

Natural Gas 

47% 

Residual Oil 

2% 

Process Gas 

1% 

Coal 

41% 

Gasoline 

8% 

All Others 

1% Source: Draft 2002 NEI 

Figure 23 presents NEI data on the sources of energy-related CAP emissions shown in Figure 

22, by source category and fuel usage. External combustion boilers contribute to almost two 

thirds of energy-related emissions for this sector. According to NEI data, 47 percent of energyrelated CAP emissions are due to onsite natural gas consumption and 41 percent of energyrelated emissions are due to onsite coal consumption. The sector does not use large amounts 

of coal, but coal’s emissions intensity contributes to the relatively high fraction of coal-related 

CAP emissions (sulfur dioxide and nitrogen oxides are both linked to coal combustion). 

NEI data from 2002 show that key opportunities for reducing the environmental impacts of 

sector energy use lie with reducing coal consumption and increased energy efficiency of 

external combustion boilers. According to the Alliance of Automobile Manufacturers, the industry 

has made substantial progress since 2002 in replacing coal-fired equipment with natural gasfired equipment, including the elimination of coal use at five DaimlerChrysler assembly plants, 

and similar fuel conversions at other facilities.260 

Given the motor vehicle manufacturing sector’s dependence on purchased electricity, the 

sector’s energy-related environmental footprint in part depends on energy inputs for local 

electric power generation. Energy efficiency improvements will primarily affect purchased 

electricity requirements, with associated reductions in energy-related emissions occurring at the 

utility level. 

As there are no energy consumption projections for the motor vehicle manufacturing industry 

contained in AEO 2006, we do not report carbon dioxide emissions projections for this sector. 

3.9.2 Best Case Scenario 

Opportunities 

Table 49 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

U.S. Environmental Protection Agency 3-80 March 2007 
Sector Energy Scenarios: Motor Vehicle Manufacturing 

Table 49: Opportunity assessment for the motor vehicle manufacturing industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low For plants located near landfills, landfill gas may provide an alternative boiler fuel to coal or 

other fossil fuels. Plants owned by Ford, GM, BMW, and DaimlerChrysler are currently using 

landfill gas,261 but the location-specific requirements of this opportunity limit its potential for 

offering widespread energy savings. 

Increased CHP Low CHP has limited application in assembly plants because many do not have a large thermal 

process load that is met by steam or hot water, but CHP may be cost effective for those 

plants with electricity, process heat, and steam requirements. To increase cost effectiveness, 

CHP may also be combined with absorption chillers for plants with cooling requirements. 

Though the LBNL study provided no examples of plants in the United States that 

implemented CHP, plants in Europe and Germany have successfully implemented CHP 

projects.262 New CHP installations also face barriers in terms of utility interconnection 

requirements if electricity production is expected to exceed onsite demand, and also from 

NSR/PSD permitting.263 

Equipment 

retrofit/ 

replacement 

Medium Replacing aging equipment with state-of-the-art equipment offers potential for efficiency 

improvement, within limitations imposed by capital constraints. Due to the high energy 

requirements of the painting process, painting equipment replacement has substantial 

energy-savings potential. Specific opportunities include ventilation system, oven, and control 

system replacement, as well as installation of high-efficiency motors.264 There are also 

opportunities for energy efficiency improvements for body welding technologies and process 

changes. 

Process 

improvement 

High Some process improvements may offer less capital-intensive opportunities for energy 

efficiency improvement, and also may improve product quality and reduce operating costs. 

The LBNL study provides many examples of process improvement, including reductions in 

ventilation energy use through reduced ventilation speed, and turning down air flow during 

breaks in the production process.265 

A motor vehicle manufacturing company seeking to reduce energy consumption through 

eliminating a shift was deterred by a potential triggering of NSR permitting requirements. 

NSR could have been triggered due to the need for additional process equipment during the 

remaining shift.266 

R&D Medium The LBNL study references multiple ongoing technological developments in the industry that 

will improve sector energy efficiency. Examples include the development of microwave 

heating for paint curing, and VOC removal systems that will cost-effectively treat smaller 

amounts of pollutant than current scrubber systems. Additional R&D is also needed to 

facilitate further development of low-VOC paints or wet-on-wet painting as viable and costeffective energy-savings opportunities.267 

Optimal Future Trends 

As no energy use projections are available for the motor vehicle manufacturing industry, it is not 

possible to compare a business-as-usual energy scenario with an optimal energy scenario. 

However, a preferred energy management strategy for the industry would primarily involve 

faster replacement rates of existing equipment with energy-efficient equipment, increased 

adoption of process improvements, and increased investment in R&D. Pilot applications of CHP 

in the U.S. automotive industry offer additional opportunities for energy efficiency improvement. 

Environmental Implications 

Given the automotive industry’s dependence on purchased power, and due to the magnitude of 

energy losses during electric generation and transmission, efficiency gains at the facility level 

have a magnified impact on energy-related emissions at the utility level. With the automotive 

industry geographically concentrated in the Midwest, emissions reductions would also be fairly 

concentrated geographically, with potentially greater effects on regional air quality. Reducing 

fossil fuel inputs for boiler fuel through increased landfill gas applications offer opportunities for 

U.S. Environmental Protection Agency 3-81 March 2007 
Sector Energy Scenarios: Motor Vehicle Manufacturing 

improving the sector’s emissions profile at the facility level, particularly for nitrogen oxides, 

carbon monoxide, and sulfur dioxide. 

3.9.3 Other Reference Materials Consulted 

Ford Motor Company. Ford Motor Company Pollution Prevention Case Study: Conversion of Regenerative Thermal Oxidizers to 

Regenerative Catalytic Oxidizers at the Ford Wixom Assembly Plant. Internet source. Accessed February 7, 2006. Available at 

http://www.p2pays.org/ref/13/12248.pdf. 

Isidore, C. “Ford to cut up to 30,000 jobs: No. 2 automaker to close 14 North American manufacturing plants in effort to stem 

losses,” CNNMoney.com. January 23, 2006. Internet source. Available at 

http://money.cnn.com/2006/01/23/news/companies/ford_closings/index.htm. 

“Toyota: We don’t want to be No. 1,” CNNMoney.com. Internet source. Accessed January 25, 2006. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency 3-82 March 2007 
Sector Energy Scenarios: Motor Vehicle Parts Manufacturing 

3.10 Motor Vehicle Parts Recent Sector Trends Informing the Base Case 

Manufacturing Number of facilities: ↓

3.10.1 Base Case Scenario Value of shipments: ↓

Situation Assessment Electricity intensity: ↑

Major fuel sources: Electricity, natural gas The motor vehicle parts manufacturing sector 

(NAICS 3363) encompasses a diverse set of Current economic and energy consumption data are 

firms that manufacture finished parts used in summarized in Table 50. 

the assembly of automobiles, ranging from 

firms that manufacture components such as 

gasoline engines, transmissions, and steering and brake systems, to those that manufacture 

electrical and electronic equipment, to those that produce interior seating and trimmings.268 

Original equipment manufacturers (OEMs) produce the equipment parts used in the assembly 

of new vehicles. The industry is highly fragmented, consisting of thousands of independent 

companies across the United States. According to the U.S. Census Bureau, there were more 

than 5,700 establishments in this NAICS in 2002, a decline from 5,800 in 1997. The industry 

experienced no growth in value added and a small decline in value of shipments from 1997 to 

2004 (see Table 50). 

According to the Automotive Parts Manufacturers’ Association (APMA) of Canada, natural gas 

meets approximately half of sector energy demand, with electricity meeting approximately 20 

percent and petroleum-based fuels meeting approximately 10 percent of demand.269 For the 

U.S. industry, the electricity fraction may be higher based on energy cost data compiled by the 

Census Bureau. From 1998 to 2004, electricity purchases ranged from 69 to 75 percent of total 

energy costs for the industry, representing smaller fractions in 2003 and 2004 as petroleum and 

natural gas prices increased.270 

Since Census Bureau data from the Annual Survey of Manufacturers do not provide the annual 

amount of energy produced from purchased fuels, it is not possible to calculate the total energy 

intensity of the motor vehicle parts manufacturing industry, though it is possible to calculate 

electric intensity (kWh/dollar value of shipments). Electric intensity increased by 3 percent from 

1998 to 2004. Total electricity consumption increased 14 percent from 1998 to 2004.271 

Due to the diversity of the automotive parts manufacturing industry, there are a wide array of 

processes associated with sector energy use, including assembly (18 percent of total energy 

usage), plastics molding (16 percent), and surface coating and painting (13 percent). 272 Energy 

costs generally represent less than 10 percent of total production costs for the industry.273 

Table 50 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 50: Current economic and energy data for the motor vehicle parts manufacturing industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

0.0% -2.2% -0.1% -2.3% 

U.S. Environmental Protection Agency 3-83 March 2007 
Sector Energy Scenarios: Motor Vehicle Parts Manufacturing 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

NA NA 2.1% 0.9% 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)llll 

Natural Gas Net Electricity Othermmmm 

48% 41% 7% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 18% 

Fuel Oil LPG Coal 

Fraction of natural gas inputs that could be 

met by alternate fuels 

50% 42% 11% 

Fuel-Switching Potential in 2002: Coal to Alternate Fuels 

Switchable fraction of coal inputs Withheld 

Natural Gas Fuel Oil Electricity 

Fraction of coal inputs that could be met by 

alternate fuels 

94% 14% 4% 

Expected Future Trends 

Though no energy projections are available for the motor vehicle parts manufacturing industry, 

recent trends suggest that electricity consumption is growing relative to the value of economic 

output. Increases in electricity intensity suggest that controlling energy costs in a volatile fuel 

market has not motivated the industry toward increased energy efficiency investment to a 

notable degree. The available data for this sector suggest a slow rate of energy efficiency 

improvement in future, primarily through replacement of aging equipment with newer 

technologies. No fuel-switching trend is expected. 

llll Fuel input and fuel-switching data are for the larger NAICS category, transportation equipment (NAICS 336). 

mmmm Within MECS, the largest fractions of the “other” category include still gas and waste gas, asphalt and road oil, petroleum 

coke, and purchased steam. 

U.S. Environmental Protection Agency 3-84 March 2007 
Sector Energy Scenarios: Motor Vehicle Parts Manufacturing 

Environmental Implications 

Figure 24: Motor vehicle parts manufacturing sector: energy-related CAP emissions 

Motor Vehicle Parts Mfg. Sector: 

NEI CAP Emissions 

(Total: 10,000 tons) 

Energyrelated 

31% 

All other* 

69% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Motor Vehicle Parts Mfg. Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 3,000 tons) 

CO 

79% 

NH3 

<1% 

PM10 

1% 

NOX 

16% 

SO2 

VOC <1% 

4% 

Source: Draft 2002 NEI 

Figure 24 compares NEI data on energy-related 

CAP emissions with total CAP emissions for the Effects of Energy-Related CAP Emissions 

motor vehicle parts manufacturing industry. As NOx emissions contribute to respiratory illness and 

purchased electricity meets a substantial may cause lung damage. NOx emissions also 

fraction of this sector’s energy needs, it is contribute to acid rain, ground-level ozone, and 

important to note that NEI data attribute reduced visibility. 

emissions to the generating source rather than 

the purchasing entity. Thus, NEI data 

underestimate energy-related emissions for this sector. However, the sector is a relatively minor 

source of onsite energy-related CAP emissions compared with other sectors considered in this 

analysis—approximately 3,000 tons per year compared with more than 700,000 tons per year 

for the chemical manufacturing industry. 

The large fraction of carbon monoxide (CO) emissions for this sector are believed to be an NEI 

reporting error, as 92 percent of all carbon monoxide emissions listed in NEI are from a single 

facility. This error also contributes to the magnitude of energy-related CAP emissions resulting 

from internal combustion engines and gasoline consumption shown in Figure 25, as that same 

facility accounts for 98 percent of all CAP emissions resulting from internal combustion engines. 

After correcting for this error by eliminating the data from that facility, total energy-related CAP 

emissions for the motor vehicle parts manufacturing industry are approximately 867 TPY (as 

reported in Table 13, Section 2.3.3), carbon monoxide emissions comprise around 23 percent of 

energy-related CAP emissions, and nitrogen oxide emissions comprise around 57 percent. 

U.S. Environmental Protection Agency 3-85 March 2007 
Sector Energy Scenarios: Motor Vehicle Parts Manufacturing 

Figure 25: Motor vehicle parts manufacturing sector: 

CAP emissions by source category and fuel usage 

Motor Vehicle Parts Mfg. Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 3,000 tons) 

Gasoline 

76% 

Natural Gas 

23% 

All Others 

1% 

Source: Draft 2002 NEI 

Motor Vehicle Parts Mfg. Sector: 

Energy-Related CAP Emissions by Source 

(Total: 3,000 tons) 

Industrial 

Processes 

6% 

Internal 

Combustion 

Engines 

Othe 76% r 

1% 

External 

Combustion 

Boilers 

17% 

Source: Draft 2002 NEI 

Figure 25 presents NEI data on the sources of energy-related CAP emissions shown in Figure 

24, by source category and fuel usage. Though NEI data errors skew the Figures (as previously 

noted), reductions in onsite energy consumption would have the largest effect on nitrogen oxide 

emissions resulting from natural gas fuel use. 

In terms of CAP emissions, the energy-related environmental footprint for this sector is expected 

to increase as energy usage increases. Given the sector’s dependence on purchased electricity, 

a fraction of its energy-related environmental footprint is linked to trends in electric generation, 

with substantial energy-related emissions impacts occurring at the utility level. CAP emissions 

from natural gas and petroleum fuel use occur at the facility level, and overall increases in 

energy consumption are likely to increase these energy inputs as well. 

As there are no energy consumption projections for the motor vehicle parts manufacturing 

industry contained in AEO 2006, we do not report carbon dioxide emissions projections for this 

sector. However, increasing energy consumption would lead to increased carbon dioxide 

emissions as well. 

3.10.2 Best Case Scenario 

Opportunities 

Table 51 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 51: Opportunity assessment for the motor vehicle parts manufacturing industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low Due to the sector’s dependence on purchased electricity, the environmental impact of 

energy inputs will follow national trends for electric generation. There may be some 

opportunity for clean fuels improvement through increased use of renewable energy in 

electric power generation. 

Increased CHP Low Sector shows little CHP potential. 

U.S. Environmental Protection Agency 3-86 March 2007 
Sector Energy Scenarios: Motor Vehicle Parts Manufacturing 

Opportunity Ranking Assessment (including potential barriers) 

Equipment retrofit/ 

replacement 

Medium As in other sectors, replacing aging equipment with state-of-the-art equipment offers 

potential for efficiency improvement in the motor vehicle parts industry. One example cited 

by APMA includes fuel-fired equipment controlled by oxygen trim controls to improve 

combustion efficiency. Facility lighting and HVAC improvements offer additional 

opportunities for energy savings.274 

Process 

improvement 

High Process improvements offer less capital-intensive opportunities for energy efficiency 

improvement and also may improve product quality and reduce operating costs. System 

optimization for compressed air, exhaust, and make-up air systems was cited as a best 

practice by APMA.275 In plastics molding, reducing the time involved in press changeovers 

decreases idle running time and saves energy.

276 Other process improvement opportunities 

may be similar to those found in the metal casting industry, and painting process 

improvements may be similar to those found in motor vehicle manufacturing. 

R&D Low Our research did not produce any information regarding an R&D pipeline of energy 

efficiency technologies unique to this sector. 

Optimal Future Trends 

As no energy use projections are available for the motor vehicle parts manufacturing industry, it 

is not possible to compare a business-as-usual energy scenario with an optimal energy 

scenario. However, a preferred energy management strategy for the industry would primarily 

involve faster replacement rates of existing equipment with energy-efficient equipment and 

increased adoption of process improvements. 

Environmental Implications 

Given the motor vehicle parts manufacturing industry’s dependence on purchased power, and 

due to the magnitude of energy losses during electric generation and transmission, efficiency 

gains at the facility level have a magnified impact on energy-related emissions at the utility level. 

Due to the magnitude of energy losses during electric generation and transmission (more than 

twice the amount of delivered energy for fossil fuel-fired power plants), efficiency gains at the 

site level have a magnified impact on energy-related emissions at the utility level. At the facility 

level, energy efficiency improvements will primarily affect nitrogen oxide emissions. However, 

due to the geographic dispersion of the industry, energy trends are unlikely to have a noticeable 

impact on regional air quality. 

3.10.3 Other Reference Materials Consulted 

NRCan. Buildings and Industry: Powder Metallurgy at Automotive Parts Plant. Natural Resources Canada. 2005. Available at 

http://oee.nrcan.gc.ca/publications/infosource/pub/ici/caddet/english/r405.cfm?attr=20. 

Standard & Poor’s. Industry Surveys: Autos & Auto Parts. 2005. 

U.S. Department of Energy. Plastics: Industrial Assessment. 2003. Available at http://www.nrel.gov/docs/fy05osti/38529.pdf. 

U.S. Department of Labor, Bureau of Labor Statistics. Motor Vehicle and Parts Manufacturing. Internet source. Available at 

http://www.bls.gov/oco/cg/cgs012.htm. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency 3-87 March 2007 
Sector Energy Scenarios: Petroleum Refining 

3.11 Petroleum Refining Recent Sector Trends Informing the Base Case 

3.11.1 Base Case Scenario Number of facilities: ↓

Situation Assessment Value of shipments: ↑

The petroleum refining industry (NAICS 32411, Major fuel sources: Refinery gas (fuel gas), natural gas 

324110) includes establishments engaged in Current economic and energy consumption data are refining crude petroleum into refined petroleum summarized in Table 52. products through multiple distinct processes 

including distillation, hydrotreating, alkylation, 

and reforming. In addition to fuels, the industry 

produces raw materials for the petrochemical industry. 

In the 1980s and 1990s, the petroleum refining industry underwent large-scale consolidation, 

shutting down small, inefficient refineries and expanding refineries with larger capacities. The 

number of operable refineries dropped from 194 in 1990 to147 in 2004. During the same period, 

throughput increased from 15.6 to 16.9 million barrels per day, and refinery utilization increased 

from 87.1 to 93 percent. The industry is now dominated by a relatively small number of large, 

vertically integrated companies operating multiple facilities.277

Sector energy usage is concentrated primarily in the South Census Region (57 percent) and the

West Census Region.278 For petroleum refining, the most important fuels are refinery gas (also 

referred to as “still” gas, this fuel represents a substantial portion of the “other” fuel category in 

MECS) and natural gas. Though petroleum refining used to be an industry with slim margins, 

industry consolidation has largely addressed this problem. Of the sectors included in this 

analysis, petroleum refining experienced the strongest economic growth in terms of annual 

increases in value added and value of shipments from 1997 to 2004 (see Table 52). 

Table 52 summarizes current economic trend and energy consumption data originally presented 

in Chapter 2. 

Table 52: Current economic and energy data for the petroleum refining industry 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

5.4% 6.3% 6.6% 5.0% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

116.3 16.1 21.0% 3.1% 

U.S. Environmental Protection Agency 3-88 March 2007 
Sector Energy Scenarios: Petroleum Refining 

Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only) 

Othernnnn Natural Gas Net Electricity 

68% 27% 4% 

Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels 

Switchable fraction of natural gas inputs 18% 

LPG Other Fuel Oil 

Fraction of natural gas inputs that could be 

met by alternate fuels 

58% 27% 24% 

Expected Future Trends 

Several trends are expected to impact 

sector energy use in the future: 

• Heavy and/or sour crudes—which 

require more energy-intensive 

processing than “premium” 

crudes—are expected to contribute 

a growing fraction of fuel oil 

production. As existing reserves of 

oil are depleted and there is greater 

worldwide competition for premium 

(e.g., light, sweet) crudes, refiners 

will increasingly utilize heavy and/or 

sour crudes to meet demand. 

• There is expected to be increasing 

use of unconventional sources of oil 

like tar sands and shale oil. These 

materials also require more energyintensive processing to separate oil 

from sand or rock strata. The 

disposal of the rock byproduct after 

processing is of environmental 

concern and would lead to further 

Voluntary Commitments 

The American Petroleum Institute is a member of Climate 

VISION, committing to a 10 percent energy efficiency 

improvement by 2012. Specific areas of focus include expanding 

CHP, reducing methane and carbon venting from production 

operations, gasifying refinery residuals, and developing more 

robust methods for tracking and reporting GHG emissions 

industry-wide. See 

http://www.climatevision.gov/sectors/oil_gas/index.html. 

The petroleum refining sector also participates in DOE’s 

Industries of the Future (IOF)/Industrial Technologies Program 

(ITP) as an “Energy Intensive Industry.” ITP’s goals for all 

energy intensive sectors include the following: 

 Between 2002 and 2020, contribute to a 30 percent 

decrease in energy intensity. 

 Between 2002 and 2010, commercialize more than 10 

industrial energy efficiency technologies through research, 

development & demonstration (RD&D) partnerships. 

See http://www.eere.energy.gov/industry/petroleum_refining/. 

energy consumption to make the processed oil fit for refining into fuel products. 

• Production of synthetic fuels (primarily used as blending components for diesel fuel) using 

coal-to-liquids (CTL), gas-to-liquids (GTL), or other processes will increase, particularly in 

the face of high oil prices. Synthetic fuel production is generally a more energy-intensive 

form of fuel production than traditional petroleum refining processes, and is also 

associated with higher carbon dioxide emissions. 

nnnn “Other” fuels consist primarily of byproduct gas generated in the refining process, often referred to as “still” gas. 

U.S. Environmental Protection Agency 3-89 March 2007 
Sector Energy Scenarios: Petroleum Refining 

• Increasing demand for biofuels will impact transportation fuel supply. The Renewable 

Energy Standard requires that ethanol—currently at 3 percent of the nation’s gasoline 

supply—grow to 5 percent by 2012, and ethanol is projected to continue growing beyond 

2012. This statute will require petroleum refineries to manufacture more gasoline blending 

stock to support the increase in ethanol production. Ethanol production is also more 

energy intensive than petroleum refining. 

• Lastly, EPA’s low sulfur regulations for on-road and off-road diesel are expected to 

decrease refinery efficiency because the hydrotreatment process of sulfur removal is

highly energy intensive. 

Under its reference case scenario, CEF projects that overall energy consumption by the 

petroleum refining sector will increase by 25 percent from 1997 to 2020, primarily driven by 

increasing production. Energy intensity is projected to increase by 0.2 percent per year 

(compared with a 1.1 percent annual decrease for industrial manufacturing as a whole). In 

addition to the production-related factors that drive increased energy consumption described 

above, according to AGF the industry has exploited many of the easiest opportunities for energy 

efficiency gains, so the future pace of energy efficiency improvement is likely to be slow.279 

The sector will continue to depend on refinery gas and natural gas as primary energy sources. 

Fuel-switching is a readily available option for the petroleum refining industry, and petroleum 

refineries will continue to switch fuels in response to relative prices.280 

CEF projections are summarized in Table 53. 

Table 53: CEF reference case projections for the petroleum refining industry 

1997 Reference Case 2020 Reference Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 2.126 70% 2.291 60% 

Natural gas 0.800 26% 1.300 34% 

Coal 0.003 0% 0 0% 

Delivered electricity 0.110 4% 0.200 5% 

Total 3.039oooo 100% 3.791 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) 0.2% 

Overall % change in energy use (1997-2020) 25% 

In an effort to assess the impact of recent trends that may have affected energy consumption 

since the CEF report was produced, we also examined reference case energy consumption 

projections for the petroleum refining industry produced in connection with EIA’s Annual Energy 

Outlook 2006 (AEO 2006), which also uses the NEMS model but incorporates more recent 

energy and economic data. From 2004 to 2020, AEO 2006 projects that the industry’s value of 

shipments will grow at the rate of 1 percent per year, and energy consumption will increase by 

50 percent over the period—double the increase projected by CEF. AEO 2006 projects that 

oooo According to 2002 MECS data, total energy consumption for the petroleum refining sector in 2002 was approximately twice 

the value CEF reports for 1997. We are unable to fully account for the magnitude of the difference between the two data 

sources. 

U.S. Environmental Protection Agency 3-90 March 2007 
Sector Energy Scenarios: Petroleum Refining 

energy intensity (energy consumption per dollar value of output) will grow by 1.5 percent per 

year. Consumption of all fuel types is projected to increase, with the largest increases seen for 

still gas (43 percent) and coal (500 percent). 

The dramatic increase in coal consumption projected by AEO 2006 is primarily driven by the 

increasing production of synthetic fuels from coal. CTL is the production of coal-based synthetic 

fuels using either a direct liquefaction process or the Fischer-Tropsch process (which involves a 

gasification step). This process is fundamentally a feedstock use of coal, but a CHP unit may be 

added to generate electricity. EIA assumes that expansion of CTL production in the petroleum 

refining industry will be associated with considerable CHP capacity additions. For the CTL 

production process modeled by EIA, 49 percent of coal inputs are retained in the product, 20 

percent are consumed in conversion processes, and 31 percent are used for electricity 

generation. Given the minimal electricity requirements of the petroleum refining industry, the 

majority of such power production would likely be sold to the grid. 

Environmental Implications 

Figure 26: Petroleum refining sector: energy-related CAP emissions 

Petroleum Refining Sector: 

NEI CAP Emissions 

(Total: 789,000 tons) 

Energyrelated 

38% 

All other* 

62% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Petroleum Refining Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 299,000 tons) 

CO 

16% 

PM10 

3% 

SO2 

36% 

NOX 

40% 

NH3 

<1% 

VOC 

5% 

Source: Draft 2002 NEI 

Figure 26 compares NEI data on energyrelated CAP emissions with non-energy- Effects of Energy-Related CAP Emissions 

related CAP emissions for the petroleum 

refining sector. According to the figure, SO2 and NOx emissions contribute to respiratory illness 

and may cause lung damage. Emissions also energy-related CAP emissions are less than contribute to acid rain, ground-level ozone, and half of all CAP emissions and are dominated reduced visibility. by nitrogen oxide and sulfur dioxide. (As 

noted in Section 2.3.3, NEI data on carbon 

monoxide emissions appear higher than would be expected for stationary sources, so we do not 

address carbon monoxide data in our assessment of CAP emissions for each sector.) Energy 

efficiency and clean energy improvements are expected to primarily affect emissions of these 

pollutants. According to MECS data, in 2002 net electricity comprised less than 2 percent of the 

petroleum refining industry’s total energy demand, so NEI data provide a fairly complete picture 

of the sector’s energy-related CAP emissions. 

U.S. Environmental Protection Agency 3-91 March 2007 
Sector Energy Scenarios: Petroleum Refining 

Figure 27: Petroleum refining sector: CAP emissions by source category and fuel usage 

Petroleum Refining Sector: 

Energy-Related CAP Emissions by Source 

(Total: 299,000 tons) 

External 

Combustion 

Boilers 

51% 

Industrial 

Processes 

37% 

Other 

2% 

Internal 

Combustion 

Engines 

10% 

Source: Draft 2002 NEI 

Petroleum Refining Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 299,000 tons) 

Process Gas 

30% 

Gas 

(unspecified) 

28% 

Natural Gas 

23% Residual Oil 

7% 

Oil 

(unspecified) 

3% 

All Others 

9% 

Source: Draft 2002 NEI 

Figure 27 presents NEI data on the sources of energy-related CAP emissions shown in Figure 

26. According to MECS data (see Table 52), “other” fuels (primarily refinery gas and still gas) 

met the majority of the sector’s energy needs in 2002. In NEI, such fuels are likely classified 

either as “gas (unspecified)” or “process gas.” Though the largest fraction of energy-related CAP 

emissions is from external combustion boilers, emissions that are classified as related to 

industrial processes in NEI are also substantial. As previously noted, NEI equipment 

classifications are problematic due to reporting inconsistencies. DOE reports that the majority of 

the sector’s energy consumption is from direct fuel inputs into the following systems: boilers, 

furnaces, reboilers in distillation columns, thermal and catalytic crackers, and steam systems 

used for steam stripping and other purposes.281 

CEF and AEO 2006 projections of increasing energy consumption for the petroleum refining 

industry would primarily increase energy-related CAP emissions at the facility level. 

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions 

estimates from AEO 2006, which totaled 207 million metric tons in 2004. For the petroleum 

refining industry, increasing energy consumption leads to a projected increase in carbon dioxide 

emissions of 56 percent from 2004 to 2020, in line with the expected increase in total energy 

consumption. 

3.11.2 Best Case Scenario 

Opportunities 

Table 54 ranks the viability of five primary opportunities for improving environmental 

performance with respect to energy use (Low, Medium, or High). A brief assessment of the 

ranking is also provided, including potential barriers. 

Table 54: Opportunity assessment for the petroleum refining industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low As the sector’s primary energy source is refinery gas—a byproduct of the production 

process—there is minimal potential for a large-scale shift toward cleaner fuel inputs. 

U.S. Environmental Protection Agency 3-92 March 2007 
Sector Energy Scenarios: Petroleum Refining 

Opportunity Ranking Assessment (including potential barriers) 

Increased CHP High Though the petroleum refining industry has relatively low demand for electricity, it has 

the third-largest cogeneration capacity among manufacturing industries. The industry 

meets 30 percent of its electricity requirements with onsite power generation, most of 

which is cogenerated.282 Due to the magnitude of the industry’s steam requirements, 

cogeneration is generally a cost-effective way of meeting this demand. According to 

DOE analysis there is substantial potential to increase CHP capacity in the refining 

industry, and also to increase waste heat reduction and recovery (particularly in lowerquality steam and exit gases).283 As mentioned previously, DOE expects that in the 

future, increased synthetic fuel production will be a driver of increased cogenerating 

capacity to the degree that onsite demand for electricity could be exceeded.284 

New CHP installations also face barriers in terms of utility rates and interconnection 

requirements if electricity production is expected to exceed onsite demand, and also 

from NSR/PSD permitting.285 

Equipment 

retrofit/ 

replacement 

Medium For capital-intensive industries, CEF predicts that the largest energy efficiency gains will 

come from replacement of old equipment with state-of-the-art equipment.286 

Opportunities lie with furnaces, heat exchange equipment (replacement with helical, 

vertical heat exchangers), sensors and controls, equipment used in separation 

processes, and containment vessels.287 Continuous reforming technology improves the 

efficiency of transportation fuel refining; Digital Equipment Condition Monitoring is a 

process control technology that allows the system to operate closer to maximum 

efficiency. Retrofits can also reduce energy losses from steam systems (pipes, traps, 

and valves). 

API cites cost and regulatory barriers to energy efficiency improvement, noting “energy 

efficiency is not usually a business driver and is difficult to justify as an investment when 

capital recovery is too long.”288 To avoid NSR, refineries may find it easier to retrofit 

existing equipment as opposed to installing the latest energy-efficient technologies. 

Process 

improvement 

Medium The most energy-intensive processes in petroleum refining include distillation 

(atmospheric and vacuum), hydrotreating, alkylation, and reforming.289 Energy losses 

can be reduced through implementation of energy management best practices, 

minimization of energy-intensive processes such as distillation, process optimization to 

reduce downtime and maintenance requirements, and replacement of solid phase 

catalysts with ionic liquids.290 API has the objective of increasing usage of less energyintensive biological processes, including bioprocessing of crude, biotreatment of 

wastewater, and bioremediation of soil and groundwater contamination. 

API cites uncertainties about future product requirements as inhibiting some processrelated changes. There is uncertainty about future performance-related requirements on 

the part of consumers, as well as uncertainty about future regulatory requirements.291 

R&D Medium API notes the following R&D focus areas: replacements for existing separation 

processes, improved process yields through development of more selective catalysts, 

development of better pathways for hydrocarbon conversion, and bioprocessing.292 

Promising technologies are currently in development, such as membrane separation 

technologies that increase the efficiency of distillation units by 20 percent. 

Under Climate VISION, the R&D Challenge focuses on technologies that 

reduce/sequester carbon emissions.293 The industry has developed mission statements 

and roadmaps for crucial R&D priority efforts as part of its efforts with DOE/IOF; see 

http://www.eere.energy.gov/industry/petroleum_refining/. With the elimination of most of 

the nation’s small, inefficient refineries and expansion of remaining, larger, more efficient 

refineries, refining margins have improved in 2004 and 2005. The industry’s 

strengthened financial position may help attract capital necessary for R&D and other 

large-scale improvements. 

API notes the following factors that inhibit the development of new energy-saving 

technologies and processes in the petroleum refining industry: a number of technical 

barriers (intrinsic process inefficiency, lack of understanding about mechanisms leading 

to fouling, inadequate sensing and measuring techniques, inadequate process models), 

regulatory requirements, costs and risks associated with developing new technology, 

and a lack of long-term commitment to fundamental research.294 

U.S. Environmental Protection Agency 3-93 March 2007 
Sector Energy Scenarios: Petroleum Refining 

Optimal Future Trends 

Under its advanced energy scenario, CEF projects the petroleum refining sector’s overall 

energy use to decline slightly below current levels, and energy intensity to decrease by 0.9 

percent annually. The decline in sector energy consumption is driven primarily by decreased 

demand for petroleum-based fuels brought about by the greenhouse gas emissions regulations, 

rather than from energy efficiency gains within the sector. As GHG regulations included under 

the advanced scenario drive shifts to less carbon-intensive fuels, CEF projects that the total 

amount of energy provided by petroleum-based fuels will decrease by 2020, while the amount of 

energy provided by natural gas will increase over 1997 levels. 

CEF’s advanced case projections are summarized in Table 55. 

Table 55: CEF advanced case projections for the petroleum refining industry 

1997 Advanced Case 2020 Advanced Case 

Consumption 

(quadrillion Btu) 

Percentage Consumption 

(quadrillion Btu) 

Percentage 

Petroleum 2.126 70% 1.799 61% 

Natural gas 0.800 26% 1.014 35% 

Coal 0.003 0% 0 0% 

Delivered electricity 0.110 4% 0.126 4% 

Total 3.039 100% 2.939 100% 

Annual % change in energy intensity (energy consumption per dollar value of output) -0.9% 

Overall % change in energy use (1997-2020) -3.0% 

Environmental Implications 

Under the advanced energy scenario, CEF projects that the petroleum refining industry to 

achieve a 15 percent reduction in 1997 carbon emissions levels by 2020, primarily due to the 

lower carbon intensity of natural gas as compared with petroleum-based fuels. This shift is 

expected to improve emissions of criteria pollutants as well, particularly nitrogen oxides and 

sulfur dioxide. 

3.11.3 Other Reference Materials Consulted 

American Petroleum Institute. Basic Petroleum Data Book, Volume XXV - Number 1. February 2005. 

Ernest Orlando Lawrence Berkeley National Laboratory and American Council for an Energy-Efficient Economy. Emerging 

Energy Efficient Industrial Technologies. March 2001. 

Ernest Orlando Lawrence Berkeley National Laboratory. Energy Efficiency Improvement and Cost Saving Opportunities for 

Petroleum Refineries – An ENERGY STAR® Guide for Energy and Plant Managers. February 2005. 

Howard K. Gruenspecht and Robert N. Stavins, Resources for the Future. New Source Review Under the Clean Air Act: Ripe for 

Reform. 2002. 

Lori Ryerkerk, Exxon Mobil at Texas Industrial Energy Management Forum, Beaumont, Texas. Taking on the World’s Toughest 

Energy Challenges. April 2005. 

U.S. Department of Energy. Gasoline Biodesulfurization, Petroleum Project Fact Sheet. May 2003. 

U.S. Environmental Protection Agency 3-94 March 2007 
Sector Energy Scenarios: Petroleum Refining 

U.S. Department of Energy. Energy-Saving Separation Technology for the Petroleum Industry, Petroleum Project Fact Sheet. 

December 2000. 

U.S. Department of Energy. Robotics Inspection System for Storage Tanks, Petroleum Project Fact Sheet. September 1999. 

U.S. Department of Energy. Energy and Environmental Profile of the U.S. Petroleum Refining Industry. Analysis prepared by 

Energetics Incorporated. December 1998. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency. New Source Review: Report to the President. June 2002. 

U.S. Environmental Protection Agency 3-95 March 2007 
Sector Energy Scenarios: Shipbuilding and Ship Repair 

3.12 Shipbuilding and Ship Repair Recent Sector Trends Informing the Base Case 

3.12.1 Base Case Scenario Number of facilities: ↓

Situation Assessment Value of shipments: ↑

Electricity intensity: ↓

The shipbuilding and ship repair industry (NAICS 

336611) consists of 346 facilities that build and Major fuel sources: Electricity, petroleum, natural gas 

repair ships, barges, and other large commercial Current economic and energy intensity data are 

and military vessels, as well as facilities that summarized in Table 56 on page 3-97. 

manufacture offshore oil and gas well drilling and 

production platforms.295 Most shipyards were 

built prior to World War II, with layout changes made piecemeal through the years. Facilities that 

are common to most shipyards include drydocks, shipbuilding positions, piers and berthing 

positions, workshops, work areas, and warehouses. The shipbuilding and ship repair industry 

participates in EPA’s Sector Strategies Program. 

Although recent economic indicators have been positive for the shipbuilding and ship repair 

industry, the sector faces some considerable economic challenges. Value added and value of 

shipments increased from 1997 to 2004 (see Table 56).296 However, the long-term economic 

outlook for the industry may be less favorable. The sector is heavily dependent on military 

contracts and fairly uncompetitive in the global market of commercial shipbuilding, representing 

less than one percent of the global new construction market for commercial vessels.297 

Electricity purchases represent 75 to 80 percent of the sector’s energy costs, and purchased 

fuels represent the sector’s remaining energy budget, with no major switching trends (i.e., from 

electricity toward fuels) evident from 1998 to 2004.298 As Census Bureau data from the Annual 

Survey of Manufacturers do not provide the annual amount of energy produced from purchased 

fuels, it is not possible to calculate the total energy intensity of the shipbuilding industry, though 

it is possible to calculate electric intensity (kWh/dollar value of shipments), which fell by almost 

10 percent from 1998 to 2004.299 There is substantial regional variation in the sector’s energy 

profile. For example, yards in the Northeast have higher fuel usage due to facility heating 

requirements. Regional differences in electricity and fuel costs may affect the cost-benefit 

calculations for energy efficiency improvement projects. 

Energy-intensive processes for shipbuilding and ship repair include welding (electric arc welding 

is most common), forging, abrasive blasting, and application of marine coatings. The greatest 

energy-related environmental improvement opportunities are related to equipment replacement 

and/or retrofits to increase the energy efficiency of compressed air systems, HVAC systems, 

lighting, and motors.300 

Table 56 summarizes current economic trend and energy intensity data originally presented in 

Chapter 2. 

U.S. Environmental Protection Agency 3-96 March 2007 
Sector Energy Scenarios: Shipbuilding and Ship Repair 

Table 56: Current economic and energy data for the shipbuilding and ship repair industrypppp 

Economic Production Trends 

Annual Change in 

Value Added 

1997-2004 

Annual Change in 

Value Added 

2000-2004 

Annual Change in 

Value of Shipments 

1997-2004 

Annual Change in 

Value of Shipments 

2000-2004 

2.7% 5.4% 1.8% 2.4% 

Energy Intensity in 2002 

Energy 

Consumption per 

Dollar of Value 

Added 

(thousand Btu) 

Energy 

Consumption per 

Dollar Value of 

Shipments 

(thousand Btu) 

Energy Cost per 

Dollar of Value 

Added 

(share) 

Energy Cost per 

Dollar Value of 

Shipments 

(share) 

NA NA 1.2% 0.8% 

Expected Future Trends 

Economic pressures on the shipbuilding industry are expected to play a dominant role in sector 

energy use. Energy expenses represent a substantial fraction of production costs and, though 

the industry has not historically taken a strategic approach to energy management, increasing 

costs for electricity and fuels has driven growing consideration of energy issues, particularly in 

areas with high electric rates.301 Efforts to control energy costs are likely to drive incremental 

efficiency improvement, but capital constraints are likely to limit the extent of major capital 

improvements. Purchased electricity will continue to meet the majority of the sector’s energy 

requirements. 

Increased VOC regulation has the potential to increase energy requirements for pollution control 

systems. In addition, increased regulation of stormwater discharges could increase energy 

requirements for water treatment. 

Environmental Implications 

Figure 28: Shipbuilding and ship repair sector: energy-related CAP emissions 

Shipbuilding & Ship Repair Sector: 

NEI CAP Emissions 

(Total: 6,000 tons) 

Energyrelated 

44% All other* 

56% 

Source: Draft 2002 NEI 

* Includes emissions from unspecified sources; may include 

additional energy-related emissions. 

Shipbuilding & Ship Repair Sector: 

Energy-Related CAP Emissions by Pollutant 

(Total: 2,000 tons) 

CO 

8% 

PM10 

4% 

SO2 

47% 

NOX 

36% 

NH3 

<1% 

VOC 

5% 

Source: Draft 2002 NEI 

pppp MECS does not provide energy consumption data for this sector. 

U.S. Environmental Protection Agency 3-97 March 2007 
Sector Energy Scenarios: Shipbuilding and Ship Repair 

Figure 28 compares NEI data on energy-related 

CAP emissions with total CAP emissions for the Effects of Energy-Related CAP Emissions 

shipbuilding and ship repair industry. Onsite SO2 and NOx emissions contribute to respiratory illness 

energy-related CAP emissions are small and may cause lung damage. Emissions also 

compared with other sectors considered in this contribute to acid rain, ground-level ozone, and 

analysis—approximately 2,000 tons per year reduced visibility. 

compared with more than 700,000 tons per year 

for the chemical manufacturing industry. 

It is important to note that NEI data attribute emissions to the generating source rather than the 

purchasing entity. Given the sector’s reliance on purchased electricity, NEI data underestimate 

the industry’s energy-related CAP emissions. According to NEI data shown in Figure 29, 63 

percent of energy-related emissions are from residual oil consumption and 25 percent are from 

distillate oil consumption. Figure 28 shows that use of these fuels contributes to high fractions of 

sulfur dioxide and nitrogen oxide emissions, with those two pollutants comprising 83 percent of 

total CAP emissions. 

Figure 29: Shipbuilding and ship repair sector: CAP emissions 

by source category and fuel usage 

Shipbuilding & Ship Repair Sector: 

Energy-Related CAP Emissions by Source 

(Total: 2,000 tons) 

Internal 

Combustion 

Engines 

27% 

Other 

1% 

Industrial 

Processes 

1% 

External 

Combustion 

Boilers 

71% 

Source: Draft 2002 NEI 

Shipbuilding & Ship Repair Sector: 

Energy-Related CAP Emissions by Fuel 

(Total: 2,000 tons) 

Dual Fuel 

1% 

All Others 

1% 

Residual Oil 

63% 

Natural Gas 

10% 

LPG <1% 

Distillate Oil 

25% 

Source: Draft 2002 NEI 

Figure 29 presents NEI data on the sources of energy-related CAP emissions shown in Figure 

28, by source category and fuel usage. According to NEI data, the primary opportunities for 

reducing energy-related CAP emissions lie with reductions in petroleum-based fuel consumption 

and increased efficiency for external combustion boilers and internal combustion engines. 

Economic pressures on the industry could lead to reductions in petroleum consumption, which 

would decrease energy-related CAP emissions at the facility level, particularly sulfur dioxide and 

nitrogen oxides. Given the sector’s dependence on purchased electricity, a portion of the 

sector’s energy-related environmental footprint is linked to trends in electric generation, with 

most energy-related emissions impacts occurring at the utility level. 

As there are no energy consumption projections for the shipbuilding and ship repair industry in 

AEO 2006, we do not report carbon dioxide emissions projections for this sector. 

3.12.2 Best Case Scenario 

Opportunities 

Table 57 contains a brief assessment of five primary opportunities for improving environmental 

performance with respect to sector energy consumption, including potential barriers to 

implementing such opportunities. 

U.S. Environmental Protection Agency 3-98 March 2007 
Sector Energy Scenarios: Shipbuilding and Ship Repair 

Table 57: Opportunity assessment for the shipbuilding and ship repair industry 

Opportunity Ranking Assessment (including potential barriers) 

Cleaner fuels Low Due to the sector’s dependence on purchased electricity, the environmental impact of 

energy inputs will follow national trends for electric generation. There may be some 

opportunity for clean fuels improvement through increased use of renewable energy, 

either at the facility level or in electric generation, but cost considerations limit the 

magnitude of this opportunity. 

Increased CHP Low The sector shows little opportunity for CHP. 

Equipment retrofit/ 

replacement 

High Equipment replacement and retrofits offer opportunities for energy efficiency 

improvement, particularly in the areas of compressed air systems, air handling 

equipment, lighting, HVAC, and motors. In the forging process, gas-fired heating can be 

replaced with induction heating (uses a high-frequency electric current), which has lower 

operational costs and requires lower energy inputs. 

The industry’s limited capital and competing capital demands are the primary barriers to 

equipment-related opportunities. Industry representatives note that less capital-intensive 

opportunities such as facility lighting upgrades may be relatively easier to approve.302 

Process improvement High Process improvements may offer opportunities for energy efficiency improvement and 

also may improve product quality and reduce operating costs. For example, energyrelated environmental impacts from welding processes may be reduced through use of 

alternative energy sources, automation/robotics, and reduced post-weld processing.303 

In forging processes, improved efficiency of press changeovers to reduce idle running 

time will also save energy.

304 

A technical barrier to increased welding automation/robotics is the highly customized 

nature of most welding operations in U.S. shipyards, where there are relatively few 

repetitive production processes. 

R&D Low Given the capital constraints and long-term economic forecast for the shipbuilding 

industry, low levels of investment in R&D of new technologies are expected. The 

Welding Industry Vision Workgroup did set forth R&D needs and challenges with 

respect to welding processes. 

Optimal Future Trends 

As no energy use projections are available for the shipbuilding industry, it is not possible to 

compare a business-as-usual energy scenario with an optimal energy scenario. However, a 

preferred energy management strategy for the shipbuilding industry would primarily involve 

faster replacement rates of existing equipment with energy-efficient equipment and increased 

adoption of process improvements. 

Environmental Implications 

Given the shipbuilding industry’s dependence on purchased power, the majority of 

environmental benefits (in terms of decreased CAP and carbon emissions) from increased 

energy efficiency in the shipbuilding industry would occur outside the facility at the utility level 

from reductions in purchased electricity. Due to the magnitude of energy losses from fossil fuel 

fired electric power generation, efficiency gains at the site level could have a magnified impact 

on energy-related emissions at the utility level, depending on the energy sources employed by 

local electric power generators. 

Replacing fossil fuel-fired equipment with electric-powered equipment (as in the case of 

induction heating in forging operations) would shift energy-related emissions from the facility to 

the utility level. Though electric-powered equipment may be more efficient, fossil fuel-fired 

electric power generation is associated with substantial energy losses that could offset 

U.S. Environmental Protection Agency 3-99 March 2007 
Sector Energy Scenarios: Shipbuilding and Ship Repair 

efficiency gains in terms of energy-related emissions. Such outcomes would depend on local 

variations in electric power supply. 

3.12.3 Other Reference Materials Consulted 

U.S. Department of Transportation, Maritime Administration. Report on Survey of U.S. Shipbuilding and Repair Facilities. 

MetalPass.com. Welding Industry Vision Workshop Result. Internet source. Available at 

http://www.metalpass.com/metaldoc/paper.aspx?docID=122. 

U.S. Environmental Protection Agency. National Emissions Inventory. 2002. 

U.S. Environmental Protection Agency 3-100 March 2007 
4. Barriers to Environmentally 

Preferable Energy Outcomes 

Chapter 4. Barriers to Environmentally 

Preferable Energy Outcomes 

4.1 Overview of Barriers 

4.2 Nonregulatory Barriers 

4.3 Regulatory Barriers 

4.4 Conclusion 

Insights 

Based upon our research—including the data sources we reviewed and the perspectives and insights 

provided to us during interviews with internal and external stakeholders—this analysis (1) identifies 

general categories of barriers (financial, technical, institutional, and regulatory) to environmentally 

preferable energy outcomes in industrial manufacturing sectors; (2) notes that regulations and their 

underlying legislation do not necessarily take into consideration the potential for an adverse impact on 

energy efficiency or clean energy improvement; (3) discusses ways in which regulations—issued by 

EPA or other agencies—may thus create barriers to energy efficiency and clean energy improvement; 

and (4) identifies specific regulatory requirements that may impact opportunities around cleaner fuels, 

increased Combined heat and power (CHP), equipment retrofit/replacement, process improvement, 

and research and development (R&D). 

4.1 Overview of Barriers 

As discussed in Chapter 3 of this report, including each sector’s table of Best Case Scenario 

Opportunities, there are a number of key opportunities for promoting environmentally preferable 

energy outcomes within each of the 12 sectors. These opportunities—reducing energy-related 

emissions through use of cleaner fuels, or by increasing energy efficiency through combined 

heat and power technologies, equipment retrofit or replacement, process improvement, or R&D 

involving energy-efficient technologies and processes—can be inhibited by a number of 

barriers. Thus, the next step is to examine what the barriers are to implementing these 

opportunities. 

Based upon our research—including the data sources we reviewed and the perspectives and 

insights provided to us during interviews with internal and external stakeholders—we identified a 

number of different types of barriers that can impact energy efficiency and clean energy 

investments. These include, but are not limited to, nonregulatory barriers (i.e., financial, 

technical, and institutional constraints) as well as regulatory barriers. Section 4.2 briefly 

discusses the nonregulatory barriers to provide context for the consideration of regulatory 

barriers. Section 4.3 then provides a more detailed discussion of regulatory barriers, as the 

purpose of this analysis is to facilitate the development of policy approaches that EPA can 

employ to address regulatory barriers and promote energy efficiency and clean energy 

improvement in select manufacturing industries. 

4.2 Nonregulatory Barriers 

4.2.1 Financial Barriers 

Primary and secondary research identified a number of financial barriers to environmentally 

preferable energy outcomes associated with financial and human capital investment, fuel cost 

differentials, and the broader economic circumstances facing one or more sectors. Sector 

representatives interviewed for this analysis indicated that such cost barriers are among the 

most important factors constraining energy efficiency and clean energy investments. 

U.S. Environmental Protection Agency 4-1 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

Competing Capital Needs 

Given scarce capital resources, the greatest investment priorities are typically for equipment 

that (1) maintains or increases production and product quality or (2) is necessary to meet 

regulatory requirements (i.e., for equipment required to comply with environmental or worker 

safety regulations). Discretionary investments for energy efficiency or clean energy projects 

must often compete with these higher-priority investments. 

Stringent Investment Hurdles 

Energy efficiency and clean energy investments may also face more stringent investment 

hurdles than other types of capital investment (i.e., shorter payback periods; evaluating 

alternatives on the basis of up-front costs rather than lifecycle costs). Companies evaluate 

capital investments in terms of which ones offer the highest return on investment (ROI). Energy 

efficiency investments may be viewed less favorably than other investments, since energy is an 

input that does not necessarily increase production capacity or productivity, improve product 

quality, increase worker safety, etc. This is particularly true in the case of new technologies that 

may entail greater risks in implementation. The American Forest & Paper Association (AF&PA) 

indicated that managers typically want to see an ROI of 25 to 30 percent on an energy efficiency 

investment.305 According to a 2004 study by the National Commission on Energy Policy, “business 

managers routinely forego efficiency opportunities with payback times as short as 6 months to three 

years—effectively demanding annual rates of return on efficiency investments in excess of 40-100 

percent.”

306 

Slow Turnover of Capital 

If firms have made a substantial investment in equipment that has a long service life, they are 

likely to continue using such equipment until the end of its useful life before replacing it with a 

more energy-efficient technology. In industries like cement and forest products, existing energyintensive equipment such as kilns and boilers have long lifetimes and require substantial 

amounts of capital to replace, which slows the rate of investment in more energy-efficient 

technologies. Such barriers are exacerbated when industry production is stagnant or declining 

and there is no expansion of production capacity, or when the industry is already at risk due to 

global competition and other economic conditions. This is the case for many of the industries 

addressed in this report, including aluminum, forest products, and segments of the chemical 

industry. 

Economic Circumstances of the Industry 

Firms are unlikely to invest capital in new equipment unless their long-term economic outlook is 

favorable. Many basic U.S. industries, such as aluminum, forest products, and segments of the 

chemical industry are not growing due to foreign competition and higher U.S. costs for labor and 

other variable costs. It may be difficult for these industries to justify large capital investments 

under current economic circumstances. It may also be more difficult to raise funding in equity 

markets if a sector is in decline or if investors do not perceive it as capturing value. Capital 

investment decisions regarding equipment replacement or retrofits may also be affected by 

resource-related constraints such as the extent of raw material reserves (e.g., the level of 

investment in equipment upgrades at cement plants may be based on the magnitude of 

remaining onsite limestone reserves). 

Some sectors face increased energy consumption based on consumer demands. Food 

manufacturers have seen increased demand for ready-to-eat and fast-prepared foods, which 

consume more energy in processing. Customers of metal finishers and motor vehicle parts 

manufacturers are also demanding improved environmental performance through certifications 

U.S. Environmental Protection Agency 4-2 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

such as ISO 14000. Such certification processes are often an important tool in identifying 

energy-savings opportunities, but they are also typically capital-intensive initiatives that may 

require expenditures on process modifications that take precedence over energy-related 

investments. 

Resource constraints may also serve as a general barrier to energy efficiency and clean energy 

investment in certain sectors. As raw material inputs become more constrained for certain 

sectors (e.g., in petroleum refining, sources of light, sweet crudes, and in forest products, 

available land for harvesting), they may be forced to process lower-quality materials that have 

higher energy requirements. 

Staff Resource Constraints 

Firms may be unable or unwilling to incur the costs (in terms of staff time and effort) associated 

with evaluating the feasibility of an energy efficiency or clean energy opportunity and making the 

investment case to management decision-makers. AF&PA indicated that even for cost-effective 

and low-risk energy-savings opportunities, facility managers must typically develop an internal 

business assessment of the investment for approval by upper management decision-makers. 

The staff time and resources required to conduct such assessment may be a barrier to 

implementing the opportunity. Even greater internal resources may be needed to make the case 

for higher-risk investments in new technologies.307 

Fuel Cost Differentials 

As it relates to cleaner fuel opportunities, the substantially lower cost of coal (an emissionsintensive energy source) as compared with cleaner fuels such as natural gas is the primary 

constraint on environmentally preferable fuel-switching opportunities. In addition, the price of 

natural gas has historically been far more volatile, further diminishing its viability as a clean fuel 

opportunity. An expert who works with metal casting facilities noted that while oxygen injection 

increases combustion efficiency, oxygen is typically as expensive or more expensive than 

natural gas, diminishing the attractiveness of this opportunity.308 

4.2.2 Technical Barriers 

In many cases, a given energy efficiency or clean energy opportunity may not be viable to a 

sector or specific manufacturing facility given process, resource, quality control, or other 

constraints. 

Some energy efficiency or clean energy opportunities are not well suited to a given industry’s 

manufacturing process (e.g., CHP is not an attractive energy efficiency opportunity for electric 

arc furnace steelmaking, because the sector has relatively low demand for steam, and waste 

heat is difficult to recover). Process-related technical constraints may also affect the extent to 

which a given opportunity can be utilized (e.g., in cement manufacturing, use of waste fuels 

such as tires in kilns is constrained because the zinc content in tires slows down setting time). 

The manufacturing process diversity of other sectors (e.g., chemical manufacturing, metal 

casting) means that processes and technologies that work for some manufacturing facilities may 

not be applicable to other operations. 

Other technical constraints relate to the ability of firms to implement an energy efficiency or 

clean energy opportunity given equipment configurations (e.g., type of boiler or burner in place), 

facility constraints (e.g., adequate space for new process equipment), supply constraints (e.g., 

price and availability of alternative fuels), and location-specific limitations (e.g., proximity to 

landfills as a source of landfill gas). Industries also face quality-control constraints related to 

manufactured product output. For example, an R&D opportunity for the metal finishing industry 

U.S. Environmental Protection Agency 4-3 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

is the substitution of non-cyanide-based plating solutions for cyanide solutions. While some 

substitute processes reduce energy consumption in the metal finishing process as well as in 

waste treatment, viable alternatives remain impractical for a number of metals due to product 

quality issues. 

4.2.3 Institutional Barriers 

In some cases, institutional barriers associated with incentives and information flow constrain 

investment in energy efficiency and clean energy opportunities. 

Incentive Constraints 

Incentive constraints refer to industry characteristics that reduce incentives to invest in energy 

efficiency or clean energy opportunities. Even for the energy-intensive industries addressed in 

this report, energy costs are less significant than costs for labor and raw materials. Thus, energy 

efficiency opportunities may not be considered a fruitful area to pursue potential cost savings. 

Historically, sectors such as food manufacturing have viewed energy as a fixed cost, which 

means that there is little incentive to pursue energy-savings opportunities. In some cases, 

energy costs may be paid by headquarters, while equipment purchasing decision-making 

happens at the facility level. If energy costs are outside the plant manager’s incentive structure, 

he or she may have little reason to pursue investments in energy-efficient equipment. 

Conversely, facility managers may be reluctant to invest the time and effort in making the case 

for energy efficiency-related capital upgrades to corporate management, as such investments 

may not be perceived as integral to the business’s profitability. 

Informational Constraints 

In addition to lacking a systematic approach to energy management, firms may also lack 

leading-edge information on energy-efficient technologies, or have inadequate internal 

resources to seek out and evaluate such information. An expert on the metal finishing industry 

indicated that, within the industry, there is generally a low level of technical capability in this 

area, with firms relying heavily on equipment suppliers for expertise.309 In other cases, energy 

efficiency expertise may be compartmentalized among technical experts, without adequate 

distribution at the decision-making level of the firm. Sometimes decisions about equipment 

replacement must be made quickly to limit production interruptions. In such cases, if more 

efficient technologies have not been identified, replacement decisions may be less than optimal. 

This problem is compounded by the fact that much industrial capital stock is long lived. 

In other cases, informational constraints may be related to an excess of information, especially 

where there are insufficient staff resources to devote to sorting through a mass of technical 

assessments to identify which technologies offer the best opportunities for a given 

manufacturing operation. At least one sector (aluminum) indicated that while there is an 

enormous amount of technical information available regarding R&D for energy-efficient 

technologies, it does not seem that this information is optimally coordinated and disseminated 

across government, the private sector, and academia. Such lack of coordination may limit 

implementation of newly developed technologies and processes. 

4.3 Regulatory Barriers 

It is clear that for manufacturing industries, nonregulatory barriers are often the dominant factor 

inhibiting investment in energy efficiency and clean energy opportunities. Though it is critical to 

acknowledge the importance of such barriers, the purpose of this analysis is to facilitate the 

development of policy approaches that EPA can employ to address regulatory barriers and 

U.S. Environmental Protection Agency 4-4 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

promote energy efficiency and clean energy improvement in select manufacturing industries. 

This emphasis is appropriate given the role of EPA’s Office of Policy, Economics, and 

Innovation in developing and coordinating cross-agency policy approaches to improving the 

environmental performance of entire sectors. The focus on regulatory barriers is also 

appropriate given the purview of other federal agencies working to promote energy efficiency 

and clean energy opportunities—for instance, DOE’s Industrial Technologies Program, which 

establishes collaborative public-private partnerships to facilitate new technology R&D. 

Our assessment of sector energy consumption and National Emissions Inventory data in 

Chapter 3 indicated that across multiple sectors, major areas of opportunity for improved 

environmental performance with respect to energy use lie with increased efficiency in electric 

and thermal energy generating systems, particularly through increased CHP and increased 

boiler efficiency. Alternatives to fossil fuels also represent key opportunities for some sectors, 

such as biomass fuels in the forest products industry and waste fuels in cement manufacturing. 

Thus, our discussion of regulatory barriers focuses on key ways in which regulations may 

contribute to less environmentally preferable energy outcomes in these areas: 

• Regulations may fail to fully reward the environmental benefits associated with an energy 

efficiency opportunity, allowing energy efficiency to be evaluated on an equivalent basis 

with other pollution control strategies such as add-on controls. 

• Regulations may lack procedural flexibility that facilitates pursuit of energy efficiency or 

cleaner fuel opportunities, particularly in areas where permitting changes are required to 

implement an opportunity. 

• Notwithstanding their environmental, health, and safety benefits, regulations affecting 

industrial manufacturing sectors frequently have implications in terms of energy 

consumption. The rulemaking process may not consider and address such implications in 

a consistent way. 

• Regulations or policies may contribute to unfavorable market conditions for energy 

efficiency or cleaner fuels opportunities. 

As discussed in Chapter 1, this analysis relies primarily on readily available public information, 

limited interviews with representatives from the regulated community, and inputs from various 

stakeholders, including industry and regulators. The examples of regulatory barriers discussed 

in the following sections are not intended to be a comprehensive list of all of the regulatory 

barriers potentially affecting the sectors included in this analysis, but rather are intended to 

illustrate key regulatory barriers that affect the most promising energy-related environmental 

improvement opportunities discussed in this report. Also, it is important to note that these 

barriers are not new, and many entities at the federal, state, and local level currently have 

initiatives underway to address them. Our discussion of Policy Options in Chapter 5 will provide 

some examples of regulatory initiatives at the federal level aimed at addressing these issues. 

Regulations May Not Account for Environmental Benefits of Energy Efficiency 

Energy efficiency is a form of pollution prevention that leads to decreases in energy-related 

criteria air pollutant and greenhouse gas emissions through reduced fuel usage. However, some 

environmental regulations do not fully account for the environmental benefits of energy 

efficiency and do not provide adequate mechanisms for recognizing or rewarding the emissions 

reductions that accrue from more efficient fuel use. In particular, input-based standards that 

establish emissions limits based on heat input (e.g., pounds of pollutant emitted per Btu of 

delivered fuel) or pollutant concentrations at the outflow (parts per million (ppm)) do not 

differentiate between more and less efficient fuel usage.310 Input-based standards—which may 

U.S. Environmental Protection Agency 4-5 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

be used in permitting regimes as well as in establishing emissions allowances under cap-andtrade systems—do not provide a true indication of environmental performance, as there is no 

accounting for the amount of energy produced from fuel inputs. By failing to account for the 

environmental benefits associated with increased energy efficiency, such standards fail to 

create appropriate incentives for investment in energy-efficient technologies. 

Most equipment used to generate thermal or electric energy (boilers, turbines, many industrial 

process, and CHP applications) have historically been governed by input-based emissions 

standards.311 An input-based standard does not differentiate between a more efficient boiler that 

produces more thermal energy from the same amount of fuel as a less efficient boiler. Though 

the more efficient boiler generates less pollution on an annual basis due to its lower fuel usage, 

input-based emissions limits have no mechanism for accounting for the difference in fuel usage 

between these two boilers, or rewarding more efficient fuel use. 

In addition to contributing to general disincentives for energy efficiency investment, input-based 

standards are particularly problematic for CHP applications because they provide no 

mechanism for accounting for the two forms of energy output—electric and thermal—that are 

produced from a single fuel source, and thus offer little incentive for investment in CHP as a 

pollution control strategy. 

As noted in the opportunity assessments in Chapter 3, industry representatives frequently cite 

the costs imposed by environmental regulations and associated permitting requirements as 

barriers to investment in energy-efficient equipment, such as the increased capital and 

operational costs associated with add-on pollution controls that do not increase productive 

output, or the administrative costs associated with permitting processes. To a large degree, 

input-based regulations penalize energy efficiency investments by failing to recognize and offer 

credit for their environmental benefits and requiring additional investments (i.e., through 

installation of pollution control technology) to create emissions reductions. Input-based 

regulations reduce compliance flexibility by not providing adequate mechanisms for sources to 

include energy efficiency as part of their pollution control strategy. 

Regulations May Lack Procedural Flexibility 

Many of the industry representatives consulted in connection with this analysis cited permitting 

barriers as inhibiting investments in energy efficiency or cleaner fuels opportunities. A facility 

may be reluctant to make a change that would require modification or review of an existing 

operational permit (for instance, under Title V of the Clean Air Act) or trigger a preconstruction 

permitting requirement under New Source Review (NSR). When energy efficiency or clean 

energy investments trigger the need for new permits or changes to existing permits, the result 

may be increased time required to implement a project, increased administrative burdens, or 

other adverse impacts on the project schedule. Particularly for facilities with limited staff 

resources, the potential for encountering permitting requirements may discourage pursuit of the 

opportunity. 

Potential permit-related barriers include the following examples: 

• Installation of new melting furnace technologies that entail new or expanded exhaust 

systems typically triggers state and local permitting requirements. Many smaller metal 

casting facilities would prefer to retrofit existing equipment than to install new technologies 

due to constraints on capital and personnel resources to address permitting 

requirements.312 

U.S. Environmental Protection Agency 4-6 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

• Due to concerns about the time and expense associated with an NSR permitting process, 

a motor vehicle assembly plant was dissuaded from undertaking a project that would have 

reduced energy use by eliminating a shift, as this change would have required the 

installation of additional permitted equipment to increase production during the remaining 

shift.313 

• Increased use of alternate or waste fuels (e.g., process byproducts or waste oils, paints, 

or tires) may represent opportunities for sectors to reduce purchased fuel requirements. In 

addition, waste fuel use can potentially also represent opportunities for environmental 

improvement in cases where using waste fuels for energy content reduces total energy 

consumption by combining energy generation and waste disposal processes, or through 

more complete combustion than would be offered under alternate disposal mechanisms 

(for example, the higher combustion efficiency that is achieved in cement kilns as 

compared with most commercial incinerators314). 

Permitting requirements are in place to ensure an appropriate level of environmental protection, 

and an environmentally preferable energy scenario would certainly not dispense with these 

protections. In the case of increased use of waste fuels, for example, such activity would have 

to represent a net environmental improvement over alternate mechanisms of disposal. 

However, there are opportunities for increased flexibility under existing regulations that could be 

enacted to promote the implementation of energy-related opportunities with demonstrable 

environmental benefits. In addition, the NSR process could be revised to better recognize 

energy efficiency and pollution both in the permitting process and structure and in the 

expression of the results through output-based permit limits. 

Regulatory Process May Not Consider Energy Implications 

Regulations frequently have implications in terms of energy consumption and associated 

emissions, notwithstanding their environmental, health, and safety benefits. Examples follow: 

• Hydrotreatment used to desulfurize diesel to meet EPA mandates for lower sulfur limits for 

on-road and off-road diesel is an energy-intensive process that will increase energy 

consumption at petroleum refineries. Further regulations to lower sulfur limits on home 

heating oil and residual marine fuel oil may also have similar impacts. 

• Regulations requiring the installation of regenerative thermal oxidizers (RTOs) in the wood 

products industry have increased non-process-related consumption of natural gas. The 

new Plywood Maximum Achievable Control Technology will require additional RTO 

installations by October 2008.315 

• The Occupational Safety and Health Administration’s hexavalent chromium permissible 

exposure limit may increase energy use in the metal finishing industry due to increased 

use of protective equipment, including greater air monitoring equipment and special 

sanitizing showers for workers. 

• Under the National Pollutant Discharge Elimination System, increased regulation of 

stormwater discharges could increase energy requirements for water treatment at 

shipbuilding and ship repair facilities, potentially increasing air emissions. 

• Increased volatile organic compound regulations under the National Ambient Air Quality 

Standards have the potential to increase energy requirements for pollution control 

systems in multiple sectors. 

In some cases, EPA has conducted an effective assessment of the energy-related impacts of 

proposed regulations as part of the rulemaking process. For example, EPA is undertaking an 

U.S. Environmental Protection Agency 4-7 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

“energy impact” analysis of the Spill Prevention Countermeasures and Control regulations to 

determine their effect on energy use in various industries. This analysis is being done in 

coordination with DOE, the Small Business Administration, the Department of Transportation, 

and the Department of Commerce. This model might be used to inform other regulatory and 

nonregulatory efforts. Overall, there may be opportunities for closer consideration of energyrelated impacts and a more systematic approach for evaluating such impacts during the 

rulemaking process. 

Regulations May Contribute to Unfavorable Market Conditions 

Regulations may also create disincentives for investment in energy-efficient technologies by 

failing to establish appropriate policy frameworks for promoting broader application of these 

technologies—either through policy actions that create disincentives for such investments or by 

failure to enact regulations that establish supportive conditions for investment. Examples of 

such barriers include the following: 

• Recent changes made by the Federal Energy Regulatory Commission regarding 

implementation of Section 210(m) of the Public Utility Regulatory Policies Act eliminate 

the requirement that utilities purchase power from qualifying facilities in certain markets, 

potentially creating less favorable market conditions for onsite power generation.316 

• New Internal Revenue Service guidance on the biomass tax credit (Section 45) decreased 

the value of the credit, potentially affecting the financial viability of increased biomass fuel 

317 usage.

• Representatives from the iron and steel industry cited the need for greater mitigation of 

the economic, technical, and environmental risks associated with the use of new 

technologies. Specifically pertaining to regulatory liability, use of unproven technologies 

may entail risks associated with long-term liability under the Comprehensive 

Environmental Response, Compensation, and Liability Act.318 

Other frequently cited barriers that fall into this category pertain specifically to the adoption of 

CHP and other distributed generation (DG) technologies. Many utilities create impediments to 

CHP through their rate structures and through time-consuming interconnection requirements. 

Such barriers are among the top concerns of organizations working to promote broader 

adoption of CHP technology like the United States Combined Heat and Power Association.319 

Common utility rate practices that reduce the financial viability of grid-connected CHP 

opportunities include excessive rates for backup power, high standby connection charges, and 

exit fees. In deregulated markets, sources must still pay demand charges to access 

competitively supplied backup power, and transmission and distribution tariffs governing such 

charges may also set unfavorable rates.320 Inequitable rate structures also affect adoption of 

other DG technologies such as fuel cells and renewable energy generation with biomass fuels 

or other renewable energy sources. The fact that regulatory agencies have in many cases not 

prohibited such practices represents an opportunity for policy change. 

Interconnection requirements—the technical and procedural requirements associated with 

connecting a distributed generation technology to the grid—may also inhibit investment in CHP 

and other DG opportunities. Interconnection requirements vary locally as determined by the 

utility or entity governing the regional transmission infrastructure, and they are often time and 

labor intensive, particularly for smaller applications that may be required to meet the same 

standards as large generating units. To inhibit installation of CHP applications, some utilities 

have established extensive interconnection requirements such as pre-certification, high safety 

standards, and costly testing, making the interconnection process time intensive and costly for 

U.S. Environmental Protection Agency 4-8 March 2007 
Barriers to Environmentally Preferable Energy Outcomes 

grid-connected CHP applications.

321 As interconnection requirements vary between jurisdictions, 

the lack of standardization also serves as a barrier to broader technology adoption (particularly 

for small units), as it inhibits mass production of DG technologies.322 The lack of standardized 

and streamlined interconnection requirements that establish appropriate protocols for smaller 

versus larger DG applications also represents a regulatory barrier. 

4.4 Conclusion 

While barriers to broader investment in energy efficiency and clean energy opportunities often 

stem primarily from nonregulatory factors such as financial, technical, and institutional 

constraints, regulations can reinforce such barriers by not accounting for the environmental 

benefits of energy efficiency, by not offering appropriate incentives for investment, by making 

investment less feasible through a lack of procedural flexibility, and in general by contributing to 

unfavorable market conditions or failing to create more favorable market conditions for energy 

efficiency and clean energy technologies. Chapter 5 provides suggested policy options EPA 

could employ to remove or reduce the regulatory component of impediments to energy 

efficiency and clean energy investment. 

U.S. Environmental Protection Agency 4-9 March 2007 
This page deliberately left blank. 
5. Policy Options Chapter 5. Policy Options 

5.1 Internal Actions and Coordination 

5.2 External Actions and Coordination 

5.3 Conclusion 

Insights 

EPA program offices have already undertaken a number of steps to remove regulatory barriers at 

the federal level. The research conducted for this analysis—including the data sources we 

reviewed and the perspectives and insights provided to us during interviews with internal and 

external stakeholders—has indicated that environmentally preferable energy outcomes may 

also be promoted through the following policy options: (1) developing and promoting broader 

application of regulations that recognize the emissions reductions resulting from increased 

energy efficiency; (2) increasing procedural flexibility to promote environmentally preferable 

energy use; (3) promoting broader consideration of the energy implications of rulemakings; (4) 

promoting the development of more favorable market conditions for energy efficiency and clean 

energy technologies; and (5) providing additional incentives and assistance through a sectorbased approach. 

The analysis of key opportunities for promoting environmentally preferable energy outcomes in 

each of the 12 sectors discussed in Chapter 3, and the potential regulatory barriers to 

implementing those opportunities discussed in Chapter 4, indicate that changes in policy may 

help to promote the use of cleaner fuels as well as energy efficiency improvement through 

combined heat and power (CHP), equipment retrofit or replacement, process improvement, and 

research and development (R&D). EPA could remove potential regulatory barriers through 

changes in policy or reduce potential regulatory barriers through incentives that make the 

barriers surmountable from an investment standpoint. Certain activities are within EPA’s internal 

jurisdiction and are discussed in Section 5.1; others extend into broader coordination with 

external agencies and entities and are discussed in Section 5.2. 

As with the discussion of regulatory barriers in Chapter 4, the following policy options are not 

intended to be comprehensive or definitive in terms of actions to be undertaken by EPA. They 

are simply intended to illustrate possible approaches for removing and/or reducing potential 

regulatory barriers identified through our research, which consisted of a review of relevant data 

sources and interviews with internal and external stakeholders. 

5.1 Internal Actions and Coordination 

It is important to note that several EPA program offices are in the process of making significant 

adjustments to existing regulations that would have a direct impact on promoting 

environmentally preferable energy use: 

• EPA continues to reform the New Source Review program. For example, based on final 

recommendations from EPA’s 2002 New Source Review: Report to the President, in 

September 2006 EPA’s Office of Air and Radiation proposed making three improvements 

to specific areas of the NSR program: (1) “debottlenecking,” allowing exemptions for 

projects that increase the overall efficiency of an operation by modifications to one part of 

a facility that increase throughput in unmodified parts of the facility; (2) clarifying NSR 

requirements regarding aggregation, treating multiple related projects as a single project 

for NSR purposes; and (3) “project netting,” eliminating the need for complex source-wide 

U.S. Environmental Protection Agency 5-1 March 2007 
Policy Options 

emissions analysis if the net effect of a project does not result in a significant emissions 

increase.323 

• The Office of Solid Waste (OSW) has proposed a revised definition of solid waste to 

promote greater recycling primarily through the reuse of hazardous secondary materials. 

• The Office of Air Quality Planning and Standards (OAQPS) has a number of initiatives 

underway to promote energy efficiency, including recently released output-based New 

Source Performance Standards (NSPS) governing several sizes of boilers and combustion 

turbines that promote more efficient fuel use and recognize the environmental benefits of 

CHP. OAQPS also has initiatives underway to assess the climate impacts of proposed 

rulemakings, as well as a rule that offers increased permitting flexibility for modified woodfired boilers to encourage the use of non-fossil fuels. 

The following policy options suggest additional actions EPA could take to remove the regulatory 

barriers discussed in Chapter 4 through changes in regulatory policy. 

Develop Regulations That Account for Environmental Benefits of Energy Efficiency 

EPA could continue to develop and promote broader application of regulations that recognize 

the emission reductions that result from increased energy efficiency. Output-based regulations 

provide a mechanism for incorporating the benefits of increased energy efficiency and produce 

emissions reductions across multiple pollutants through reduced fuel use—achieving emissions 

targets for regulated pollutants as 

well as producing incidental Policy Option: 

reductions in unregulated emissions 

such as greenhouse gases (GHGs). Develop and promote broader application of regulations that 

recognize the emissions reductions resulting from increased energy Output-based regulations promote efficiency, particularly through: energy efficiency as a pollution 

control strategy by allowing • Output-based emissions standards that account for the thermal 

equitable comparison between and electric energy output of CHP. 

energy-efficient generating • Output-based emissions standards governing other combustion equipment and other emissions processes such as energy-generating and manufacturing 

reduction technologies such as add- process equipment. 

on controls. Such regulations are 

also applicable to market-based 

approaches to environmental protection by providing sources with greater compliance flexibility 

and promoting technology innovation. 

Suggested areas where the use of input-based standards may indicate opportunities for 

regulatory improvement include the following: 

• Clean Air Act permitting of new CHP applications under NSR typically employs an inputbased approach that establishes emissions limits based on fuel inputs. By failing to 

account for the technology’s dual outputs of thermal and electric energy, the input-based 

approach does not recognize and reward the increased fuel use efficiency of CHP. 

• Recent combustion-related rulemakings that also employed input-based standards 

(lb/MBtu) include the National Emission Standards for Hazardous Air Pollutants 

(NESHAP) for some sizes of industrial boilers and process heaters. NESHAPs for 

stationary combustion turbines employed a concentration-based (ppm) standard. 

In other recent rulemakings, such as the stationary combustion turbine NSPS, EPA has used 

output-based standards to promote greater fuel use efficiency. EPA could continue to pursue 

U.S. Environmental Protection Agency 5-2 March 2007 
Policy Options 

additional opportunities for the use of output-based standards, particularly with respect to NSR 

permitting processes and new rulemakings governing combustion equipment (e.g., CHP, 

boilers, and process heaters). 

Increase Procedural Flexibility to Promote Environmentally Preferable Energy Use 

To address permit-related barriers to investment in energy efficiency or cleaner fuels 

opportunities, EPA could increase procedural flexibility in the areas of flexible permitting and 

increased recycling for energy recovery. In some cases, these strategies will require examining 

emissions tradeoffs at a broader level than the facility level and quantifying energy consumption 

and emissions tradeoffs. Options for providing technical assistance to industry and permitting 

authorities to quantify and evaluate such tradeoffs are also discussed below. 

FLEXIBLE PERMITTING Policy Option: 

Flexible permitting aims to promote 

certain environmentally preferable Increase procedural flexibility surrounding opportunities to reduce 

energy-related emissions on a system-wide level through: activities by providing exceptions to 

permitting requirements for certain • Expanding flexible permitting opportunities that promote types of changes (for example, reductions in energy-related emissions as part of a pollution 

modifications to methods of prevention strategy, including developing a flexible permitting 

operation or equipment), provided rule. 

that plant-wide emissions remain • Promoting broader recycling of wastes and process byproducts 

below enforceable caps. Flexible for energy recovery. 

permitting may also entail an • Providing assistance to the regulated community as well as state 

advance approval process for and local permitting authorities in support of efforts to increase 

specific changes. Like output-based procedural flexibility in environmental regulations, including 

emissions standards, flexible technical guidance on evaluating energy-related environmental 

permitting can also be used to tradeoffs at a system-wide level. 

support market-based approaches to 

environmental protection to provide 

sources with greater compliance flexibility and promote technology innovation. 

This policy option might include adding flexibility to the permitting process whereby specific 

changes to fuel inputs, processes, or equipment that are directly tied to improving environmental 

performance through energy-related modifications would not automatically trigger the full blown 

permit review. For example, many industry comments encountered in our research remark that 

a more flexible definition of “routine maintenance” would help diminish NSR barriers to energy 

efficiency improvement projects. EPA’s September 2006 proposal is a major step in this 

direction. 

EPA has historically offered flexible permitting on a pilot basis for pollution prevention and is 

considering developing a formal flexible permitting rule. In connection with its existing efforts, 

EPA could evaluate additional energy efficiency and clean energy opportunities that are good 

candidates for flexible permitting incentives, either through existing pilot programs such as those 

offered by Performance Track or ideally through development of a flexible permitting rule. 

Suggested areas where flexible permitting may offer opportunities for regulatory improvement 

include the following examples: 

• Replacement of inefficient boilers with high-efficiency boilers or CHP. 

• Other changes to fuel inputs, processes, or equipment that are directly tied to improving 

environmental performance through energy-related modifications. 

U.S. Environmental Protection Agency 5-3 March 2007 
Policy Options 

• Streamlined permitting processes or permitting exemptions to promote adoption of new 

energy-efficient technologies, such as those developed through DOE’s Industrial 

Technologies Program (e.g., advanced furnace and process heating technologies). 

• Expansion of flexible permitting beyond major sources. 

RECYCLING FOR ENERGY RECOVERY 

EPA’s focus on recycling has traditionally been on promoting recycling for materials recovery 

with relatively less emphasis on promoting recycling for energy recovery. As such, opportunities 

to encourage increased energy efficiency or alternatives to fossil fuel consumption through 

recycling for energy recovery may be overlooked. Beyond efforts currently underway at OSW, 

EPA could work to (1) find additional areas to promote greater emphasis on recycling for energy 

recovery under existing regulations and (2) ensure that the development of new regulations 

does not exclude environmentally beneficial uses of waste or byproduct-derived fuels. 

Suggested areas where increased recycling for energy recovery may offer opportunities for 

regulatory improvement include the following examples: 

• Employing a sector-based approach to identify areas where increased use of waste fuels 

(i.e., solvents, waste oil, or paint) could produce environmentally preferable outcomes 

over alternate methods of disposal (i.e., through avoided landfilling or through recovery of 

useful energy from waste that would otherwise be incinerated). 

• Evaluating environmental tradeoffs to facilitate the development of regulatory mechanisms 

that promote greater recycling for energy recovery by recognizing the environmental 

benefits of energy-related reuse and recycling in the permitting process. 

• Assessing energy implications and possible environmental benefits of increased energyrelated recycling in the development of new regulations, and developing appropriate 

mechanisms to incent such activities, provided they ensure an appropriate level of 

environmental protection. 

ASSISTANCE TO INDUSTRY AND PERMITTING AUTHORITIES 

In cases were EPA has revised or is in the process of revising regulatory requirements, 

perception barriers may persist that inhibit investment in energy efficiency or clean energy 

opportunities. For example, despite recent NSR reforms, industry may still be reluctant to 

undertake energy-related projects that might potentially trigger NSR due to lingering concerns 

that NSR requirements will be burdensome. Regulations are technically complex, and while they 

are established at the federal level by EPA, they are implemented at the state level, which may 

lead to variability and uncertainty on the part of industry regarding regulatory requirements. A 

sector-based communications and outreach strategy could be designed to identify key areas 

where NSR reforms have made energy-related improvement opportunities less burdensome 

than they would have been previously. 

Technical assistance may also be needed to support flexible permitting and increased recycling 

for energy recovery, particularly where there are environmental tradeoffs between facility-level 

and system-wide emissions. Implementing such policy options would require EPA to recognize, 

understand, and articulate energy and environmental tradeoffs—for example, an energy savings 

of “x” Btus would be “worth” an increase in “y” air pollutant. Moving beyond the facility level to a 

system-wide perspective will likely require complex analysis. For example, the assessment 

might involve weighing energy savings and increased pollution at a fuel-using facility versus 

decreased energy use for waste treatment and handling at a different facility where the waste 

U.S. Environmental Protection Agency 5-4 March 2007 
Policy Options 

originated. However, a better understanding of these implications and tradeoffs is critical, 

because without this information permit writers at the state and local level may not welcome (or 

implement) any increase in regulatory flexibility. Traditional approaches to environmental 

protection have been based on pollution control technology rather than efficiency or pollution 

prevention. Without clear guidelines and a consistent regulatory approach, industry may remain 

uncertain about varying approaches and requirements across multiple facilities and states, 

which could create further disincentives for energy-related improvements. 

The following examples are suggested areas where increased assistance may offer 

opportunities for regulatory improvement: 

• Developing an information clearinghouse for the regulated community that provides a 

single point of contact and up-to-date information on regulatory requirements that have 

been revised to promote greater investment in energy efficiency and clean energy 

improvement projects. 

• Developing guidance for state and local regulators on the environmental benefits of 

energy efficiency and clean energy technology, and their appropriate treatment in the 

permitting and regulatory process. 

Promote Broader Consideration of Energy Implications of Rulemakings 

Environmental regulations can have significant energy impacts. To date, consideration of these 

impacts has been unevenly incorporated in the regulatory process. Moving forward, EPA could 

develop a systematic approach for incorporating an assessment of energy impacts in all 

regulatory venues. 

The rulemaking process provides at least three opportunities to consider energy impacts: 

• Through Executive Order (EO) 13211, 

which requires agencies to prepare a Policy Option: 

Statement of Energy Effects on 

“significant” energy actions. Review methodologies currently used to assess energy 

impacts during the rulemaking process, assess how program 

• Through EO 12866, which requires offices are interpreting/implementing these provisions, and 

agencies to prepare economic impact work across the Agency to develop a cohesive EPA position 

analyses on rulemakings that have on how such impacts should be assessed and weighed 

$100 million annual impact, raise against other Agency priorities. 

novel issues, and/or have “significant” 

impacts. 

• Through the Regulatory Flexibility Act, which requires a regulatory flexibility analysis if a 

proposed rule would have a “significant” economic impact on a “substantial” number of 

small entities. 

EPA could explore opportunities under its own authority to require that energy impacts are 

considered across all rulemaking and regulatory processes. EPA could review methodologies 

currently used to assess energy impacts during the rulemaking process, assess how program 

offices are interpreting/implementing these provisions, and work across the Agency to develop a 

cohesive EPA position on how such impacts should be assessed and weighed against other 

Agency priorities. Having a standardized policy would allow EPA to make more informed 

decisions about energy resources and environmental benefits, including potential variations for 

large versus small entities. 

U.S. Environmental Protection Agency 5-5 March 2007 
Policy Options 

5.2 External Actions and Coordination 

The following policy options suggest actions EPA could take to reduce regulatory barriers (as well 

as certain nonregulatory barriers discussed in Chapter 4) through direct incentives or policy 

support that make such barriers surmountable from an investment standpoint. Such policy support 

would extend into broader jurisdictions beyond those that are in EPA’s direct purview. 

Promote Favorable Market Conditions 

To promote the development of more favorable market conditions for energy efficiency or clean 

energy opportunities, EPA could pursue additional avenues of cross-agency coordination, 

grantmaking, and analysis. 

CROSS-AGENCY COORDINATION 

Across other federal agencies, EPA 

could implement a consistent approach Policy Option: 

to promoting policies that increase the Promote more favorable market conditions for energy efficiency and 

market viability of energy efficiency and clean energy technologies through: 

clean energy opportunities. As noted in 

Chapter 4, research to date has • Coordinating across federal agencies to support policies that 

identified a number of existing or promote the market viability of energy efficiency and clean 

potential environmental regulations and energy technologies. 

policies that might impact one or more • Offering additional grants to support clean energy applications in 

sectors, including the following: manufacturing industries. 

• Analyzing the environmental impacts of utility demand response 

• Changes to the Public Utility programs and working to promote clean energy technologies as 

Regulatory Policies Act that an electricity demand reduction strategy. 

potentially affect the viability of 

onsite power generation. 

• Changes to the Internal Revenue Service code that reduce incentives for biomass fuel 

use. 

EPA could monitor proposed regulations and perform a cross-agency coordination function to 

assess energy implications of proposed regulations or policy changes. A successful model EPA 

already employs in this area is the Combined Heat and Power Partnership, which works to 

promote more favorable market conditions for CHP and other distributed generation 

technologies. EPA could explore additional opportunities for similar efforts, including 

coordination with state regulators as well as with other federal agencies such as DOE and 

FERC. Cross-agency coordination of these efforts could be designed to assure appropriate 

coverage of relevant issues, facilitate communication, and avoid duplication of efforts. 

GRANTMAKING 

EPA could consider additional opportunities for offering direct grants to support clean energy 

applications in industrial manufacturing sectors. Utilities and Clean Energy Program 

Administrators, such as The Renewable Trust Fund-Massachusetts Technology Collaborative, 

have set up distributed energy resources in areas where the energy load is overwhelming. EPA 

could identify and work with such entities in grantmaking to sectors. Such grants would allow 

facilities to install solar or photovoltaic panels on their roofs—thereby integrating renewables 

into how industrial load is met as a way to offset purchased energy requirements. 

U.S. Environmental Protection Agency 5-6 March 2007 
Policy Options 

DEMAND RESPONSE ANALYSIS 

Energy supply disruption and market volatility are concerns to all energy users but are of 

particular concern to industrial customers for whom such disruption would negatively impact the 

process line. In areas of the country such as the Northeast, there is strong interest in the ability 

of demand response (DR) mechanisms to address system infrastructure constraints. For 

example, some utilities and transmission system operators offer incentives for customers to 

curtail their electricity usage at certain times to reduce peak demand. However, environmental 

regulators are concerned with the potential environmental impacts of some DR technologies, 

such as generators that produce an emissions-intensive form of backup power. EPA is currently 

helping the Northeast states assess the environmental impacts of different DR technologies. 

This effort provides an example of another area where EPA could seek to promote better 

convergence between energy and environmental goals. Expanding on its existing efforts, EPA 

could analyze DR programs and work with utilities in particularly volatile or transmissionconstrained electricity markets to promote clean DR technologies across one or more sectors. 

Provide Incentives and Assistance Through a Sector-Based Approach 

EPA could explore additional sector-based approaches to promoting environmentally preferable 

energy outcomes in manufacturing industries, including the following: 

• Support and promote energy efficiency and clean energy R&D activities that are underway 

across a variety of other voluntary programs. Possible activities include the following: 

– Providing sector-based 

information on R&D Policy Option: opportunities on an EPA Web 

page. Employ a sector-based approach to promoting environmentally 

referable energy outcomes through the following mechanisms: – Vetting and/or promoting 

various online emissions • Supporting energy efficiency and clean energy R&D 

reduction/benefits opportunities. 

calculators. • Providing information regarding financial incentives that are 

– Promoting energy-saving available to support energy efficiency and clean energy 

assessments and other opportunities, particularly for small businesses. 

initiatives launched by DOE 

under its Industrial Technologies Program. 

– Showcasing sector-specific awardees under other programs (e.g., ENERGY STAR). 

• Similar to its work on diesel retrofits for the construction and ports sectors, EPA could 

assess whether any federal, state, or local grant funding could be made available (or 

whether tax incentives exist) for plant upgrades—particularly for small businesses in high 

energy intensity markets. EPA could serve as an information clearinghouse regarding 

such opportunities that may be available to manufacturing sectors. 

5.3 Conclusion 

This analysis has suggested a number of potential strategies EPA could employ to remove or 

reduce regulatory barriers to improved environmental performance with respect to energy use in 

the 12 industrial manufacturing sectors. These policy options include actions the Agency could 

take internally—such as developing regulations that account for the environmental benefits of 

energy efficiency, increasing procedural flexibility to promote environmentally preferable energy 

use, and generally increasing consideration of energy impacts in rulemakings—as well as actions 

U.S. Environmental Protection Agency 5-7 March 2007 
Policy Options 

involving increased coordination with other agencies and entities to promote favorable policy and 

market conditions for energy efficiency and clean energy technologies. 

U.S. Environmental Protection Agency 5-8 March 2007 
Appendix A: Energy Projections 

To develop the “base case” and “best case” future energy consumption scenarios for each 

sector as described in Chapter 3, we relied primarily upon projections produced by three 

analyses: 

• Scenarios for a Clean Energy Future (CEF). Commissioned by the U.S. Department of 

Energy (DOE) in 2000, this report was produced by the Interlaboratory Working Group for 

Energy-Efficient and Clean Energy Technologies. For 8 of the 12 industrial manufacturing 

sectors considered in this analysis, the CEF report projects future industrial energy 

consumption trends based on three alternative technology and policy-based scenarios.324 

In Chapter 3, the CEF analysis forms the basis for our “base case” and “best case” future 

energy scenarios for many of the sectors addressed in this report.325 

• Annual Energy Outlook 2006 (AEO 2006). AEO 2006 is the most recent annual forecast 

of energy demand, supply, and prices for the United States produced by DOE’s Energy 

Information Administration (EIA). AEO 2006 includes energy consumption and carbon 

emissions projections for U.S. industrial manufacturing as well as for eight of the twelve 

sectors considered in this analysis.326 As the CEF report was produced in 2000, we used 

AEO 2006 to assess the impact of recent energy trends, and how those trends might be 

expected to produce different outcomes than projected by CEF in 2000. AEO 2006 also 

provided estimated annual carbon dioxide emissions for many of the sectors addressed in 

this analysis. 

• Natural Gas Outlook to 2020. This analysis was produced by the American Gas 

Foundation (AGF) and develops natural gas consumption projections under three 

alternative public policy scenarios regarding natural gas exploration and production. 

Projections include consumption trends for certain industrial sectors that are heavily 

dependent on natural gas.327

In the following sections we provide a brief overview of the approaches taken by these studies, 

and discuss how they were used in our analysis. For CEF and AEO 2006, we highlight key 

similarities and differences between the projections and discuss general implications for future 

industrial energy consumption trends. 

U.S. Environmental Protection Agency A-1 March 2007 
Appendix A: Energy Projections 

A.1. Clean Energy Future Scenarios 

Overview 

To develop CEF projections, the Interlaboratory Working Group used a modified version of the 

National Energy Modeling System (NEMS) developed and maintained by EIA to produce its 

Annual Energy Outlook projections. (The NEMS version used in connection with the CEF 

analysis was the version used to produce the 1999 Annual Energy Outlook (AEO 1999)). 

For the reference case scenario, modifications to the NEMS industrial demand module were 

made in the following areas: (1) for all industrial sectors, equipment retirement rates were 

changed to reflect actual lifetimes of installed equipment and (2) for the paper, cement, steel, 

and aluminum industries, more detailed modifications were made to baseline energy intensities 

and rates of energy intensity improvement to reflect best available research from those sectors. 

As a result, the CEF reference scenario projects industrial energy consumption to be 3 percent 

lower by 2020 than the projection made by AEO 1999. 

CEF developed moderate and advanced energy scenarios that are primarily based on voluntary 

commitments by industry to energy efficiency improvement. Our analysis focused on the 

advanced scenario, which promotes more aggressive energy efficiency improvement through a 

combination of (1) expanded voluntary federal programs such as the Combined Heat and Power 

(CHP) Challenge and ENERGY STAR; (2) expanded federal informational programs such as 

energy assessments and equipment labeling; (3) expanded investment enabling programs such 

as state grant programs, utility incentive programs, and tax rebates and credits; (4) mandatory 

efficiency standards for motors; (5) expanded federal demonstration and research and 

development (R&D) programs; and (6) a domestic carbon emissions trading program. 

Table 58 compares the CEF reference case and advanced case projections for industrial energy 

consumption. 

Table 58: Comparison of CEF industrial energy consumption projections through 2020: 

reference case and advanced case328 

Reference Case Advanced Case 

Base year energy consumptionqqqq (1997) 27.0 quadrillion Btu 27.0 quadrillion Btu 

Energy consumption in 2020rrrr 32.7 quadrillion Btu 27.8 quadrillion Btu 

Annual energy consumption growthssss 0.8% per year 0.1% per year 

Annual energy intensity growth -1.1% per year -1.9% per year 

Annual CHP capacity growth No data available No data available 

qqqq Given the age of the CEF study and that current industrial energy consumption as reported in AEO 2006 is lower than the 

CEF base year, we put relatively little emphasis on CEF consumption data and greater emphasis on projected rates of 

consumption growth/decline, as well as relative changes in the fraction of various fuel inputs. 

rrrr Energy consumption projections are in terms of site or delivered energy, though CEF also provides primary energy 

projections. 

ssss All rate calculations are the calculated average growth rate. 

U.S. Environmental Protection Agency A-2 March 2007 
Appendix A: Energy Projections 

Reference Case Advanced Case 

Annual fuel consumption growth 

Petroleum 0.9% 0.0% 

Natural gas 0.8% 0.3% 

Coal 0.0% -1.5% 

Purchased electricity 1.1% 0.0% 

Renewable 1.4% 1.7% 

Total value of shipments in 2020 

(billion 2000 dollars) 8,378 8,378 

Advanced Energy Scenario 

As discussed at the beginning of this section, the parameters that drive CEF’s advanced energy 

projections include a broad range of policy pathways for improving environmental outcomes with 

respect to energy use, including a cap-and-trade system for greenhouse gas (GHG) emissions. 

Table 59 presents an abbreviated version of a table that appears in the CEF study showing how 

various advanced energy policies affected different NEMS model parameters for the industrial 

manufacturing sectors included in the CEF analysis. The policies appear in the header rows, 

and the affected parameters are listed by number, with a key below. 

Table 59: Qualitative representation of advanced energy policy impacts on CEF-NEMS model329 

Technology 

Demonstration 

Programs 

Energy 

Assessment 

Programs 

Challenge 

Programs -

Motor and 

Air 

Challenge 

Programs -

Steam 

Challenge 

Programs 

- CHP 

ENERGY 

STAR 

Buildings and 

Green Lights 

Product 

Labels 

State 

Programs 

Clean Air 

Act 

Incentive 

Programs 

Alumina and Aluminum 1,2,8 1 1,2,8 3,6,9 6,9 5 n/a 1,2,3,5 1,2,3,6,9 

Cement 1,2,7,8 1,7 1,2,7,8 3,6,9 6,9 5 4 1,2,3,5 1,2,3,6,9 

Chemical Manufacturing 1,2,8 1 1,2,8 3,6,9 6,9 5 n/a 1,2,3,5 1,2,3,6,7,9 

Food Manufacturing 1,2,8 1 1,2,8 3,6,9 6,9 5 n/a 1,2,3,5 1,2,3,6,9 

Iron and Steel 1,2,7,8 1,7 1,2,7,8 3,6,9 6,9 5 n/a 1,2,3,5 1,2,3,6,7,9 

Metals-Based 

Durablestttt 1,2,8 1 1,2,8 3,6,9 6,9 5 n/a 1,2,3,5 1,2,3,6,9 

Petroleum Refining n/a n/a n/a n/a n/a n/a n/a n/a n/a 

Pulp and Paper 1,2,7,8 1,7 1,2,7,8 3,6,9 6,9 5 4 1,2,3,5 1,2,3,6,7,9 

tttt Section 3.8 includes a more detailed description of how CEF’s definition of the “metals-based durables” sector matches with 

the metal finishing sector as defined in this analysis. 

U.S. Environmental Protection Agency A-3 March 2007 
Appendix A: Energy Projections 

R&D -

Industries of 

the Future Other R&D 

ESCO / 

Utility 

Programs 

Climate 

Wise 

Program 

Pollution 

Prevention 

Tax 

Incentives 

for Energy 

Managers 

Tax Rebates 

for Specific 

Industrial 

Techs 

Investment 

Tax Credit 

for CHP 

Systems 

Carbon 

Trading 

System 

Alumina and Aluminum 2 2,3,6 n/a 1,2,8 4 1,5 2 6,9 1-6,8,9 

Cement 2 2,3,6 1,5,6,7,9 1,2,7,8 n/a 1,5,7 2 6,9 1-9 

Chemical Manufacturing 2 2,3,6 1,5,6,9 1,2,8 n/a 1,5 2 6,9 1-6,8,9 

Food Manufacturing n/a 2,3,6 1,5,6,9 1,2,8 n/a 1,5 2 6,9 1-6,8,9 

Iron and Steel 2 2,3,6 1,5,6,7,9 1,2,7,8 4 1,5,7 2 6,9 1-9 

Metals-Based Durables 2 2,3,6 1,5,6,9 1,2,8 n/a 1,5 2 6,9 1-6,8,9 

Petroleum Refining n/a n/a n/a n/a n/a n/a n/a 9 1-6,8,9 

Pulp and Paper 2 2,3,6 1,5,6,7,9 1,2,7,8 4 1,5,7 2 6,9 1-9 

Modeled within NEMS Modeled outside NEMS, then used to adjust NEMS parameters 

1: Increased annual rate of efficiency improvement in existing equipment 

7: Increased annual rate of efficiency improvement in existing equipment (iron & steel, 

cement, and pulp & paper) 

2: Increased annual rate of efficiency improvement in new equipment 

8: Increased annual rate of efficiency improvement in existing equipment (motor electricity 

use) 

3: Increased boiler efficiency 9: Increased use of cogeneration (DISPERSE modeling of CHP-policies) 

4: Increased use of recycled materials (throughput changes) 

5: Improved building energy efficiency 

6: Increased use of cogeneration (within NEMS) 

Given that the CEF study (produced in 2000) predates recent price increases for natural gas, 

we vetted CEF base case projections against projections developed by AGF in its report, 

Natural Gas Outlook to 2020.

330 This study develops natural gas consumption projections under 

three alternative public policy scenarios regarding natural gas exploration and production, 

including consumption projections for certain industrial sectors that are heavily dependent on 

natural gas such as chemicals, petroleum refining, pulp and paper, and food manufacturing. 

These projections were developed by Energy & Environmental Analytics using a proprietary gas 

market data and forecasting model. We focused on the “expected” policy scenario for industrial 

demand as the closest approximation of a business-as-usual scenario (the “existing” and 

“expanded” scenarios, which respectively involve lesser and greater degrees of natural gas 

exploration and infrastructure development than is currently planned, were less useful for our 

analysis). Where appropriate, references to differences and similarities between the CEF and 

AGF projections for natural gas consumption are made in the sector summaries contained in 

Chapter 3. 

A.2. Annual Energy Outlook Scenarios 

Overview 

Each year EIA uses NEMS to develop its long-term forecasts of energy supply, demand, and 

prices called the Annual Energy Outlook. Energy consumption projections for specific industrial 

manufacturing sectors are included as a supplement to the main report. The sector-specific 

projections that are applicable to this analysis include the following: aluminum, bulk chemicals 

U.S. Environmental Protection Agency A-4 March 2007 
Appendix A: Energy Projections 

(the commodity chemicals subset of chemical manufacturing), cement, fabricated metal 

products (which includes metal finishing), food manufacturing, iron and steel, petroleum refining, 

and pulp and paper (part of forest products). AEO 2006 also includes projected carbon dioxide 

(CO2) emissions for these sectors, which EIA calculated based on fuel consumption projections 

using CO2 coefficients from the EIA report, Emissions of Greenhouse Gases in the United 

States 2004.

331 

Our review of AEO 2006 began with comparing reference case projections for industrial 

manufacturing as a whole with projections under the high industrial technology case, which 

were examined as the EIA’s closest approximation of a “best case” scenario for industrial 

energy consumption. Reference case projections are based on growth in gross domestic 

product (GDP) of 3 percent per year (based on 2000 chain-weighted dollars), population growth 

of about 0.8 percent per year, and oil prices of $55.93 in 2005 rising to $56.97/barrel by 2030 

(all oil prices are in 2004 dollars). The industrial high technology case “assumes earlier 

introduction, lower costs, and higher efficiencies for energy technologies.”332 

Table 60 compares AEO 2006 reference case and high industrial technology case projections. 

Though AEO 2006 projections are made through 2030, we only include projection data through 

2020 to facilitate comparison with the CEF analysis. 

Table 60: Comparison of AEO 2006 industrial energy consumption projections through 2020: 

reference case and high technology case333 

Reference Case High Technology Case 

Base year energy consumption (2004) 25.68 quadrillion Btu 25.68 quadrillion Btu 

Energy consumption in 2020uuuu 28.91 quadrillion Btu 27.48 quadrillion Btu 

Annual energy consumption growthvvvv 0.7% per year 0.4% 

Annual energy intensity growthwwww -1.3% -1.7% 

Annual CHP capacity growthxxxx 2.6% 3.0% 

Annual fuel consumption growth 

Petroleum 0.7% 0.2% 

Natural gas 0.7% 0.4% 

Coal 1.0% 0.6% 

Purchased electricity 0.7% 0.2% 

Renewable 1.1% 1.6% 

Total value of shipments in 2020 

(billion 2000 dollars) 7,778 7,778 

uuuu Energy consumption projections are site or delivered energy, though AEO 2006 also provides primary energy projections. 

vvvv All rate calculations are the calculated average growth rate. 

wwww Energy intensity is measured as total energy consumption (TBtu) per dollar value of shipments (in 2000 dollars). 

xxxx Industrial CHP capacity is measured in gigawatts. 

U.S. Environmental Protection Agency A-5 March 2007 
Appendix A: Energy Projections 

Compared with the reference case, the AEO 2006 high technology case projects that faster 

adoption of new technologies will produce greater energy efficiency gains, particularly in 

manufacturing industries. To some degree, the high technology case envisions expanded 

energy production capacity through additional CHP and biomass recovery capacity, but overall 

efficiency improvements in energy production and process energy use means that the high 

technology case projects lower energy consumption by 2020 compared with the reference case. 

Under the reference case, EIA predicts that energy intensity will decrease at a higher rate in the 

manufacturing sector (1.2 percent a year) than in the non-manufacturing sector (1.0 percent a 

year). EIA attributes this difference to a continuing shift within U.S. manufacturing where the 

value of shipments by non-energy-intensive sectors increases from 54 percent in 2004 to 61 

percent in 2030, and the value of shipments by energy-intensive sectors declines from 21 

percent in 2004 to 17 percent in 2030. The rate of energy intensity decrease is even greater 

under the high technology case due to efficiency gains, but the high technology case does not 

involve a faster macroeconomic shift from energy-intensive to non-energy-intensive 

manufacturing. 

Under the reference case, industrial fuel consumption increases across all fuel types. The 

relatively higher rate of increase in coal consumption (compared with other fuels) is not strictly 

driven by energy-related end uses, as industrial coal consumption for traditional energy-related 

applications is fairly static. However, EIA assumes that expansion of coal-to-liquids (CTL) 

production in the petroleum refining industry will be associated with considerable cogeneration 

capacity additions through integrated gasification combined cycle (IGCC) technologies (see 

Section 3.11). IGCC technologies combust gasified coal in a modified gas turbine and recover 

exhaust heat to generate steam. 

Aside from industrial energy consumption and intensity trends, another important factor affecting 

future environmental impacts of industrial energy use is the trend in fuel inputs for electric power 

generation. The AEO 2006 reference case projects that purchased electricity will meet 13.5 

percent of industrial demand by 2020 (roughly the same fraction as in 2004). Through 2030, 

AEO 2006 projects that the majority of new electric generation capacity will be supplied by coalfired plants, which are more expensive to build but much cheaper to operate than natural gasfired plants that tend to be used primarily to meet peak demand. The Southeast and the West 

are expected to see the greatest additions of coal-fired electric generating capacity. The 

majority of power plants retired over the period are expected to be oil- and natural gas-fired 

steam capacity. By 2030, AEO 2006 projects that coal-fired plants will meet 57 percent of the 

nation’s electricity demand, compared with 50 percent today. In part, increased coal 

consumption in the electric power sector is driven by increases in electricity generation from 

coal gasification in combination with IGCC technologies. Compared with traditional forms of 

coal-powered generation, IGCC technologies have lower CAP emissions but equivalent carbon 

dioxide emissions. Research is ongoing into carbon sequestration applications in combination 

with IGCC to improve environmental performance. 

Comparison of CEF and AEO 2006 Projections 

In comparing the CEF and AEO 2006 projections, it is important to note that the CEF base year 

(1997) value for industrial delivered energy consumption is higher than the AEO 2006 base year 

(2004) value. This difference is attributable to the roughly 5 percent decrease in industrial 

delivered energy consumption that occurred from 1997 to 2005.334 Since base year industrial 

energy consumption in CEF is higher, it is misleading to compare 2020 consumption projections 

between the two studies. The calculated annual growth rates are therefore a more appropriate 

gauge for comparing the two analyses. 

U.S. Environmental Protection Agency A-6 March 2007 
Appendix A: Energy Projections 

For the reference cases, CEF and AEO 2006 projections for annual increases in industrial 

energy consumption are fairly close—0.8 percent and 0.7 percent per year, respectively. The 

CEF reference case projects a slightly slower rate of energy intensity improvement than the 

AEO 2006 reference case projection of 1.3 percent per year. CEF projects that industrial energy 

intensity will decrease by 1.1 percent per year, with 75 percent of this improvement attributed to 

inter-sector structural change (i.e., shifts towards less energy-intensive manufacturing 

industries) and 25 percent to sector-specific efficiency improvement. Despite projections that 

aggregated industrial energy intensity will continue to decrease, in this analysis we are primarily 

interested in projected decreases or increases in energy intensity at the sector level, as 

discussed in Chapter 3. 

In terms of projected annual changes in fuel consumption, the CEF reference case differs from 

the AEO 2006 reference case, projecting faster increases in consumption of all energy inputs 

(including renewables) except coal. It is unsurprising that CEF envisions no coal increase under 

the reference scenario, as the analysis was produced before recent price increases for natural 

gas that may create incentives for switching to coal, and as the analysis does not consider the 

energy-related impacts of CTL technology that are part of AEO 2006. 

Where the CEF reference case projection is less optimistic than AEO 2006, the CEF advanced 

case projection is considerably more aggressive in terms of its energy consumption and 

intensity reduction outcomes. This too is unsurprising, given that AEO projections are policy 

neutral and limited to those policies that have already been enacted and funded, with 

implementation rules established.335 Thus, the CEF reference case (which is based on AEO 

1999) includes the effect of already adopted policies and regulations in place as of 1999. 

Where appropriate, references to differences and similarities between the CEF and AEO 2006 

projections for specific industrial manufacturing sectors are made in the sector summaries 

contained in Chapter 3. 

U.S. Environmental Protection Agency A-7 March 2007 
This page deliberately left blank. 
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224 U.S. Department of Energy, Industrial Technologies Program. Advanced Melting Technologies: Energy Saving Concepts and 

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227 U.S. Department of Energy, Industrial Technologies Program. Advanced Melting Technologies: Energy Saving Concepts and 

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228 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Metalcasting 

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229 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Metalcasting 

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231 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Metalcasting 

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232 U.S. Department of Energy, Industrial Technologies Program. Advanced Melting Technologies: Energy Saving Concepts and 

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233 U.S. Department of Energy, Industrial Technologies Program. Advanced Melting Technologies: Energy Saving Concepts and 

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234 U.S. Department of Energy, Energy Efficiency & Renewable Energy, Industrial Technologies Program. Metal Casting Industry 

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235 U.S. Census Bureau. County Business Patterns, CenStats Databases. (Accessed September 1, 2006.) Available at 

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236 U.S. Census Bureau. County Business Patterns, CenStats Databases. (Accessed September 1, 2006.) Available at 

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237 U.S. Census Bureau. County Business Patterns, CenStats Databases. (Accessed September 1, 2006.) Available at 

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238 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers. (January 2003), 

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239 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7, 2006). 

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241 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers, [M04(AS)-1]. 

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242 National Metal Finishing Strategic Goals Program. Internet source. (Accessed February 7, 2006). Available at 

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243 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7, 2006). 

244 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7, 2006). 

245 Personal communication with Robin Kime, U.S. Environmental Protection Agency, February 7, 2006. 

246 Martin, N., Worrell, E., Price, Ruth, et. al. Ernest Orlando Lawrence Berkeley National Laboratory. Emerging Energy-Efficient 

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247 Elliott, Shipley, Brown. CHP Five Years Later: Federal and State Policies and Programs Update. [Report Number IE031.] 

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248 National Metal Finishing Resource Center. Internet source. Available at http://www.nmfrc.org. 

249 U.S. Census Bureau. 2002 NAICS Definitions. (2003). Internet source. (Accessed March 1, 2006.) Available at 

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250 Alliance of Automobile Manufacturers. U.S. Production Facilities. (2006). 

251 Klier, T. and Rubenstein, J. Chicago Fed Letter. “The U.S. Auto Supplier Industry in Transition.” (May 2006). Available at 

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252 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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253 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers, [M04(AS)-1] 

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254 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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255 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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256 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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257 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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258 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers (January 2003). 

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259 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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260 Valerie Ughetta, Director, Stationary Sources, Alliance of Automobile Manufacturers. Personal communication with Alison 

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261 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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262 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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263 Elliott, Shipley, Brown. CHP Five Years Later: Federal and State Policies and Programs Update. [Report Number IE031.] 

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264 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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265 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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266 U.S. Environmental Protection Agency. New Source Review: Report to the President. (June 2002). 

267 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving 

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268 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers. (December 2005). 

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U.S. Environmental Protection Agency March 2007 
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269 Automotive Parts Manufacturers’ Association (APMA). Energy Practice Benchmarking. Available at 

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270 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers. (January 2003). 

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271 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers. (January 2003). 

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272 Automotive Parts Manufacturers’ Association (APMA). Energy Practice Benchmarking. Available at 

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273 Automotive Parts Manufacturers’ Association (APMA). Energy Practice Benchmarking. Available at 

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274 Automotive Parts Manufacturers’ Association (APMA). Energy Practice Benchmarking. Available at 

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275 Automotive Parts Manufacturers’ Association (APMA). Energy Practice Benchmarking. Available at 

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276 U.S. Department of Energy, Industrial Technologies Program. Plastics: Industrial Assessment. (July 2003). Available at 

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277 U.S. Department of Energy, Office of Industrial Technologies. Energy and Environmental Profile of the U.S. Petroleum 

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278 U.S. Department of Energy, Energy Information Administration. Manufacturing Energy Consumption Survey, 2002 Data 

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280 American Gas Foundation. Natural Gas Outlook to 2020. (February 2005). Available at 

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281 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy 

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282 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy 

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283 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy 

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284 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006 [DOE/EIA-0383(2006)] 

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285 Elliott, Shipley, Brown. CHP Five Years Later: Federal and State Policies and Programs Update. [Report Number IE031.] 

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286 Interlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a 

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287 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at 

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288 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at 

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289 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy 

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E3M, Incorporated. Available at 

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290 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at 

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291 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at 

http://www.eere.energy.gov/industry/petroleum_refining/pdfs/petroleumroadmap.pdf. 

292 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at 

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293 Climate VISION. Private Sector Initiatives. Internet source. (Accessed September 13, 2006.) Available at 

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294 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at 

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295 Personal correspondence, Shana Harbour (U.S. EPA) with Beth Gearhart (U.S. Maritime Administration). (December 2005). 

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296 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers (January 2003). 

Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf. 

U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005). 

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297 U.S. Department of Transportation, Maritime Administration. Outlook for the Shipbuilding and Repair Industry (June 1998). 

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298 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005). 

Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf. 

299 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers (January 2003). 

Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf. 

U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005). 

Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf. 

300 Industry representatives who provided feedback on a previous draft of this report (dated September 21, 2006) included Daniel 

Youhas (Shipbuilding Council of America), Stacy Ballow (American Shipbuilding Association), Vincent Dickinson (Bath Iron 

Works). Personal communication (January 12, 2007). 

301 Industry representatives who provided feedback on a previous draft of this report (dated September 21, 2006) included Daniel 

Youhas (Shipbuilding Council of America), Stacy Ballow (American Shipbuilding Association), Vincent Dickinson (Bath Iron 

Works). Personal communication (January 12, 2007). 

U.S. Environmental Protection Agency March 2007 
References 

302 Industry representatives who provided feedback on a previous draft of this report (dated September 21, 2006) included Daniel 

Youhas (Shipbuilding Council of America), Stacy Ballow (American Shipbuilding Association), Vincent Dickinson (Bath Iron 

Works). Personal communication (January 12, 2007). 

303 Metalpass.com. Introduction to Welding Industry Roadmap. Internet source. (2002). Available at 

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304 U.S. Department of Energy, Industrial Technologies Program. Cost-Saving Strategies at a Metal Forging Plant. (2005). 

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305 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated 

September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal 

communication (December 8, 2006). 

306 National Commission on Energy Policy. Ending the Energy Stalemate: A Bipartisan Strategy to Meet America’s Energy 

Challenges, (December 2004). 

307 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated 

September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal 

communication (December 8, 2006). 

308 Personal communication with Arvind Atreya, Professor and Director of the Industrial Assessment Center, University of 

Michigan, Department of Mechanical Engineering (December 7, 2006). 

309 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7, 2006). 

310 U.S. Environmental Protection Agency. Output-Based Regulations: A Handbook for Air Regulators. (August 2004). Prepared 

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311 U.S. Environmental Protection Agency. Output-Based Regulations: A Handbook for Air Regulators. (August 2004). Prepared 

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312 U.S. Department of Energy, Industrial Technologies Program. Advanced Melting Technologies: Energy Saving Concepts and 

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313 U.S. Environmental Protection Agency. New Source Review: Report to the President. (June 2002). 

314 Choate, W., BCS Incorporated. Energy and Emission Reduction Opportunities for the Cement Industry. (December 2003). 

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315 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated 

September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal 

communication (December 8, 2006). 

316 Kelliher, J. T., Federal Energy Regulatory Commission (FERC). Chairman Joseph T. Kelliher's statement on new PURPA 

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317 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated 

September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal 

communication (December 8, 2006). 

318 American Iron & Steel Institute (AISI) representatives who provided feedback on a previous draft of this report (dated 

September 21, 2006) included Jim Schultz, Larry Kavanaugh, and Bill Obenchain. Personal communication (December 6, 

2006). 

319 United States Combined Heat and Power Association. Key Barriers and Issues for CHP. Internet source. Available at 

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320 National Renewable Energy Laboratory. Making Connections: Case Studies of Interconnection Barriers and their Impact on 

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321 Elliott, Shipley, Brown. CHP Five Years Later: Federal and State Policies and Programs Update. [Report Number IE031.] 

(January 2003). 

322 United States Combined Heat and Power Association. Key Barriers and Issues for CHP. Internet source. Available at 

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323 U.S. Environmental Protection Agency. Proposed Rule for Improvements to EPA’s New Source Review Program: 

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324 Interlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a 

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325 Interlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a 

Clean Energy Future. [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/. 

326 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006 [DOE/EIA-0383(2006)] 

(February 2006). 

327 American Gas Foundation. Natural Gas Outlook to 2020. (February 2005). Available at 

http://www.gasfoundation.org/ResearchStudies/2020.htm. 

328 Interlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a 

Clean Energy Future. [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/. 

329 Interlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a 

Clean Energy Future. [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/. 

330 American Gas Foundation. Natural Gas Outlook to 2020. (February 2005). Available at 

http://www.gasfoundation.org/ResearchStudies/2020.htm. 

331 U.S. Department of Energy, Energy Information Administration. Emissions of Greenhouse Gases in the United States 2004. 

Available at http://www.eia.doe.gov/oiaf/1605/gg05rpt/index.html. 

332 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006 [DOE/EIA-0383(2006)] 

(February 2006). 

333 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006 [DOE/EIA-0383(2006)], 

Appendix D,Table D.2, (February 2006). 

334 U.S. Department of Energy, Energy Information Administration. Annual Energy Review 2005, Table 2.1d [DOE/EIA0384(2005)] (July 2006). Available at http://www.eia.doe.gov/emeu/aer/consump.html. 

335 Darmstadter, J. EM Magazine, “Coal Within a Revised Energy Perspective.” Air & Waste Management Association. (July 

2006). Available at http://www.rff.org/rff/Publications/Coal-Revised-Energy-Perspective.cfm. 

U.S. Environmental Protection Agency March 2007