Climate change policies and capital vintage effects: the cases of US pulp and paper, iron and steel, and ethylene Matthias Ruth a, * , Brynhildur Davidsdottir b , Anthony Amato c a Environmental Policy Program, School of Public Affairs, University of Maryland, 3139 Van Munching Hall, College Park, MD 20742, USA b Department of Geography and Center for Energy and Environmental Studies, Boston University, 675 Commonwealth Avenue, Boston, MA 02215, USA c Environmental Policy Program, School of Public Affairs, University of Maryland, 2100 Van Munching Hall, College Park, MD 20742, USA Received 3 October 2002; revised 12 February 2003; accepted 12 November 2003 Abstract Changes in material use, energy use and emissions profiles of industry are the result of complex interrelationships among a multitude of technological and economic drivers. To better understand and guide such changes requires that attention is paid to the time-varying consequences that technology and economic influences have on an industry’s choice of inputs and its associated (desired and undesired) outputs. This paper lays out an approach to improving our understanding of the dynamics of large industrial systems. The approach combines engineering and econometric analysis with a detailed representation of an industry’s capital stock structure. A transparent dynamic computer modeling approach is chosen to integrate information from these analyses in ways that foster participation of stakeholders from industry and government agencies in all stages of the modeling process—from problem definition and determination of system boundaries to generation of scenarios and interpretation of results. Three case studies of industrial energy use in the USA are presented—one each for the iron and steel, pulp and paper, and ethylene industry. Dynamic models of these industries are described and then used to investigate alternative carbon emissions and investment-led policies. A comparison of results clearly points towards two key issues: the need for industry specific policy approaches in order to effectively influence industrial energy use, fuel mix and carbon emissions, and the need for longer time horizons than have typically been chosen for the analysis of industrial responses to climate change policies. q 2003 Elsevier Ltd. All rights reserved. Keywords: Climate change policy; Technological change; Dynamic modeling; Iron and steel; Pulp and paper; Ethylene; Carbon emissions 1. Introduction The dynamics of industrial systems are influenced by a number of factors internal and external to firms, including policy measures. Understanding these dynamics as well as the underlying factors and the feedback relationships between them will be key to judging the influences that individual policies have on energy and emissions profiles of industry. If, for example, constraints on technological and managerial improvements are underestimated, then the future energy use and emissions of an industry may exceed expectations. As a consequence, policies implemented today to reduce energy use or emissions may be too lax to achieve desired energy efficiency and environmental performance goals. Conversely, assessments that are primarily guided, for example, by an analysis of periods in which an industry has changed slowly, may under- estimate future reductions in material use, energy use and emissions if the constraints, which were relevant in the past, are no longer as binding. Such underestimates may potentially prompt the enactment of policies today that are overly restrictive and may possibly even hamper future environmental and economic performance of an industry. Examples of such policies are, e.g. levying higher than necessary taxes or tougher prescriptions for best available technology choice. For the study presented here, we collaborated with the US Environmental Protection Agency and industry repre- sentatives to explore the likely consequences of climate change policies for the US pulp and paper, iron and steel and ethylene industries by building dynamic computer models 0301-4797/$ - see front matter q 2003 Elsevier Ltd. All rights reserved. doi:10.1016/j.jenvman.2003.11.008 Journal of Environmental Management 70 (2004) 235–252 www.elsevier.com/locate/jenvman * Corresponding author. Tel.: þ 1-301-405-6075; fax: þ1-301-405-4675. E-mail address: mruth1@umd.edu (M. Ruth).