ParExit: Does it impact process equipment manufacturers?

by Anand Gnanamoorthy 03 Jun 2017
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The US officially withdrew from the Paris Climate Agreement that was signed by 195 nations in 2016, aimed at controlling global warming. The agreement requested countries to work together to reduce the harmful emission such that the global temperature is limited to no more than 1.5°C above pre-industrial levels. While there are geopolitical and economic implications to this, the potential impact on the industrial market and especially process equipment needs to be analyzed in detail. While the US has withdrawn from the agreement, it does not change the various regulations and policies that have been enacted to reduce emissions. In fact, few states have signaled that they would shift the responsibility of controlling emissions from federal level to the state or local level. This has a potential to create a scenario where there are multiple states with various levels of emission norms. For primary process industries such as oil and gas, petrochemicals, with multiple sources of emission, the impact will be higher. Since process equipment are key sources of emissions, there is a greater impact on these products. Valves are the top source of industrial fugitive emissions and it is estimated that annually 3.6 trillion cubic feet of natural gas are leaked through valve packings and this represents a revenue loss of more than $30 billion. Pumps, compressors, industrial fans and motors account for the largest energy usage. Environmental Protection Agency (EPA) and Department of Energy (DoE) have released several guidelines and enacted regulations to increase the efficiency levels of various process equipment and most of the products available adhere to these standards. Hence, from a product standpoint, there are no major impacts. As noted, the biggest impact would be on the primary process industries which would have to content with the varying emission requirements and associated cost of compliance.  This would impact the cost of doing business in states with higher emission standards such as California, New York, and Washington, and would hamper investment in those. States with lower emission standards and compliance requirements will stand to gain.

While US government is still considering the next steps, there are differing viewpoints within the current administration on whether to continue with the emission standards even though the US has formally withdrawn from the agreement. As we are still in earlier stages of the negotiations, a clearer picture would emerge in the coming weeks.

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Comments (1)

By  Poornima Vijayan
Business Analyst Trainee, Cognizant

11 Jun 2017 01:34
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