Document 91gjrNyN2vYXd0Gk9v17E6ORe

The Society of The Plastics Industry, Inc. Robert H. Burnett Executive Director April 15, 1993 TO: VI Executive Board RE: Economic Study On April 8th, the CCC/Chlorine Institute held an industry briefing in Washington, D.C. to introduce the study by Charles River Associates on the economic benefits of the chlor-alkali industry. Attached for your information and internal distribution as appropriate is the executive summary and PVC-specific sections of the report. We ask that this information be used as "background" for the moment, pending recommendations from the Communications Committee (CCC/CI) as to the best means of utilization. This "game plan" should be ready within 30 days. RHB/pmb cc: VIGOR M. Scheck N. Jacobs (w/o att.) CTL6850 Wayne Interchange Plaza II 155 Route 46 West Wayne, NJ 07470 (201) 890-9299 Fax # (201) 890-7029 t Executive Summary Charles River Associates Every day, U.S. and Canadian consumers benefit from chlorine and chlorine-based products. When someone takes a drink of water, pours bleach into a washing machine, or buys cooking oil in a PVC container, he or she benefits from chlorine. Every time consumers use automobiles, buy produce in the supermarket, fill prescriptions in a drug store, or take pictures of their families, they are also benefming from chlorine. Water purification, bleaches, plastics like PVC, crop protection chemicals, pharmaceuticals, and the manufacture of photographic film are only a few examples of how U.S. and Canadian consumers gain from processes and products that use chlorine. Even though the use of chlorine chemistry results in substantial economic benefits in most sectors of our society, consumers may not realize how broadly this element touches their daily lives. Most people generally are only aware of chlorine's direct uses, but direct consumption is one of three distinct ways in which society uses chlorine and its coproducts. The element is also incorporated in other consumer products, providing them with specific, desirable characteristics, and it is used to facilitate the manufacture of hundreds of other products. Chlorine has become important in these diverse applications because of its physical and chemical properties. There are some instances where other elements can replace chlorine with modest incremental cost or performance penalties, but in most instances the use of alternative processes or materials entails significant performance loss or cost increases. In some cases, the alternative processes or materials are less environmentally friendly or present health risks. In spite of the broad range of uses and benefits from chlorine, there arc certain groups that propose a total ban on chlorine production and use because some chlorine-containing compounds have been found to pose unacceptable health and environmental risks. These risks should not be taken lightly, and any situation where chlorine-dependent processes or chlorine-containing compounds create unacceptable health and environmental risks should be corrected. In April 1992 the International Joint Commission on Great Lakes Water Quality recommended that the United States and Canada consider phasing out the use of chlorine and chlorine-containing compounds as industrial feedstocks. But any public policy debate concerning the banning of all chlorine production and use should take into 1 CTL006851 Charles River Associates Exhibit 1.1990 Value of Chlorine Chemistry ToCon*onw Economic benefits In direct uses In products containing chlorine As a facilitator Total To Local Economies Economic contributors Value of sales Employment, direct Employment, indirect Employment, total Wages, direct Wages, indirect Wages, total Gross domestic investment Balance of trade Units SBillion/Year1" SBillion/Year SBillion/Year SBillion/Year SBillion/Year Workers Workers Workers SBillion/Year SBillion/Year SBillion/Year SBillion SBillion/Year Note: (1) All costs are in U.S. dollars. SOURCE: Charles River Associates, 1993. Economic Vefcts Unite* States Csnsds Total 9.8 31.4 49.9 91.1 1.2 11.0 3.3 34.7 6.8 56.7 11.3 102.4 71.4 366,700 948,300 1,315,000 9.9 21.4 31.3 56.8 +2.9 8.5 79.9 28,400 395,100 55,600 1,003,900 84,000 t,399,000 0.8 10-7 1 1.5 22.9 | j2.3 33.6 4.4 61.2 | +0.1 +3.0 | The investment needed to build plants to make the substitutes would approach $67 billion. The transition would take 10 to 20 years, and consumers would more than likely be forced to shoulder the cost over 3 CTL006852 Charles River Associates 1. At some cost, alternatives exist for all uses of chlorine and chlorine-derived compounds. 2. Although we know that technology is constantly changing, we can only estimate the costs of the existing or definable technological alternatives for chlorine. As a result, we based our evaluation of chlorine substitutes on: Products or processes currently or previously used; Information provided in the patent literature and other sources concerning chlorine substitutes; and Modified versions of existing processes that are highly likely to be technically workable. 3. All chlorine substitute materials and processes would comply with current environment-, safety-, and health-related laws and regulations. In cases where more than one chlorine substitute exists, we used our best business and engineering judgment to determine the most likely alternative. Typically, we selected the substitute that would cost the consumer the least All information for this report came from publicly available sources and from contacts with experts in both the public and private sectors. CRA used its best business and engineering judgment to determine costs and engineering losses that would be caused by substitution, and to design economic models of consumer behavior. CRA's analysis focuses on the extent of chlorine chemistry's influence on industrial activities and consumers' daily lives. It provides specific information on' the economic tradeoffs that would result from a total ban of chlorine production and use in the United States and Canada. These tradeoffs are significant given chlorine's diverse use and the intricate association of chlorine chemistry with many technologies. 5 CTL006853 Charles River Associates References (1) "Chemicai Profile -- Caustic Potash," Chemical Marketing Reporter, October 1, 1990. (2) Riegel's Handbook of Industrial Chemistry, 9th Ed., J. Kent, ed., Van Nostrand Reinhold, 1992, Chap. 12. (3) Kirk-Othmer Encyclopedia of Chemical Technology, 2nd Ed., J. Wiley & Sons, 1963, Vol. 16. Summary of Benefits Consumer net benefits from direct chlorine consumption in water disinfection and pulp bleaching and from all uses of coproduced sodium and potassium hydroxides are estimated to be $11.0 billion per year. The estimated capital requirements for the new processes required to produce or use substitute materials amounts to $49.4 billion. The most likely substitute technologies that we have identified are both capital and energy intensive and pose their own environmental and health risks. Chlorine-Containing Products Polyvinyl Chloride Products The making of polyvinyl chloride (PVC) products has been the largest single use for chlorine for many years. In 1990, about 26 percent of chlorine production was required for the manufacture of vinyl chloride monomer (VCM), the immediate precursor to PVC. An additional six percent of chlorine production was required for the manufacture of ethylene dichloride, the immediate precursor of VCM, which was either exported or converted to products other than PVC. PVC resins are produced by polymerizing VCM, and resins with different properties for a variety of end uses can be made by controlling the reaction conditions. The bulk ' . resins are mixed with various additives that impart specific properties required for fabrication and use. Fabricators can tailor the properties of the resin-additive mixtures to optimize fabrication techniques and product performance properties, 55 CTL006854 Exhibit 3-5. Benefits of Chlorine In PVC Products (U.S. and Canada) Product Form*' Pipe *nd Fittings Pressure water Sewer/drains Duct and conduit Drain/waste/vent Irrigation Fittings and other Fabricated Products Flooring, textiles, and other calendered Siding and accessories Wire and cable Windows and other extrusions Adhesives Films and sheet Plastic bottles Other TOTAL Eatitnptad 1W0 Consumption (000 ton*) ' SubStitUtM^1' " 'Estimated Investment Required (SMIlllon) ' Estimated Incremental Cost of Substitutes (SMIlllon/Year) Estimated Total Cost ol Substitution (fMIlllon/Year) 700 Ductile iron, copper, HDPE 375 Ductile iron, HDPE, RCP 28S Aluminum, steel 300 Ductile iron, ABS 100 HDPE, AL. ABS 160 From above 273 114 24 158 36 55 1,587 590 483 774 106 322 1,642 613 487 806 114 333 515 410 230 305 60 210 120 430 4,200 Ceramics, carpet, nylon, paper, HDPE. PET Aluminum LDPE. TPO Aluminum Polyurethanes LLDPE. HDPE. TPO PET-G Miscellaneous plastics 147 9 4 7 0 88 0 59 974 1,486 266 51 198 224 36 39 535 6.697 1,515 267 51 199 224 54 39 547 6,091 (1) HDPE = high-density polyethylene; RCP = reinforced concrete pipe; ABS = acrylonitrile butadiene styrene; PET = polyethylene terephthalate; LDPE = low-density polyethylene; TPO = thermoplastic olefins; LLDPE = linear low-density polyethylene; PET-G = polyethylene terephthalate-G. SOURCE: Charles River Associates, 1993. CTL006855 Charles River Associales example, and PVC-based systems are not subject to leakage or to picking up infiltrated water that increases loads on water treatment plants. PVC products provide performance advantages in calendered products and coatings that are difficult to replace with other plastics. While uses in these product areas are highly fragmented, we believe that the most likely substitutes across all applications would be more costly per pound than PVC. Significant new investments would be required to produce and fabricate them into the PVC product forms they would substitute for, although we have assumed that all fabricators would remain in business by refurbishing their finishing lines at relatively low cost. If the properties of the substitute material preclude this, costs would be higher than shown, and some fabricators would be forced to shut down. Producing substitute materials, particularly metals and concrete, is energy intensive and can create other environmental and safety problems. Producing ductile iron requires large amounts of coke (5). Regulations governing allowable emissions in Coke production are currently being implemented because these emissions pose their own risks. In addition, operating steel mills and copper and aluminum smelters also involves significant environmental impacts. (6,7) Substituting thermoplastic olefinic materials like low-density polyethylene for PVC in electrical uses would, at minimum, require revision of existing codes and would raise safety issues because these substitutes do not have PVC's fire resistance. Our estimates do not include the costs of making the changes in building codes and other regulations that would be required if PVC products were not available. References (1) Engineered Materials Handbook, Vol. 2 -- Engineering Plastics, ASM International, 1988, p. 209. (2) "Resins 1992: Supply Patterns are Changing," Modern Plastics, January 1992, p. 53. (3) "PVC and the Environment," N. Kansvog and J. Baldwin, Norsk Hydro a.s.. Petrochemical Division, Oslo, Norway, 1992. (4) A CostIBenefit Study: In-Place Costs and Technical and Regulatory Constraints to Use of PVC-Based Pipe, Tube, and Conduit in Construction, IFT Technical Services, Berkeley, CA, 1989. 59 CTL006856 Economic Contributions Polyvinyl Chloride Chlorine's largest single outlet is in the manufacture of polyvinyl chloride (PVC) resin. This versatile plastic product is used in numerous fabricated products, as shown in Exhibit 4-4 and the product tree in Appendix B. Most applications are for durable goods that have a very long period of service, in some cases upwards of 20 years or more. U.S. and Canadian consumption of PVC amounted to 4.2 million tons in 1990, making it one of the top-selling thermoplastic resins. CRA estimates that the value of sales of PVC products amounts to more than $3.8 billion in 1990. Exhibit 4-4. Typical Products Made from PVC Household ltm* Raincoats Handbags Toys Shower curtains Suildsig end Construction Sewer and drain pipe Flooring Electrical conduits Weather stripping SOURCE: Charles River Associates, 1993. Automotive Upholstery Floor mats Roof tops Instrument panels Blood bags Tubing Sheeting Packaging Chlorinated Solvents Another large outlet for chlorine is in a group of products called chlorinated solvents. Over 910,000 tons of these products were consumed in the United States in 1988, but consumption was estimated to have dropped to about 720,000 tons in 1990. For purposes of this study, CRA collected data on sales and use of these products for each major application: for dry cleaning, for degreasing and special parts cleaning, for paint stripping and adhesives, and for use as a process solvent Exhibit 4-5 summarizes these end uses. We estimate that the value of sales of 794,000 tons of chlorinated solvents in the United States and Canada amounted to $690 million in 1990. Some chlorinated solvents have the potential to deplete stratospheric ozone and are being phased out under the Montreal Protocols. Others have no ozone-depleting potential but may have other health and safety CTL006857