| Summary: | This work investigates the effects of carbon allocation on the emission intensities of low-carbon products cogenerated in facilities that co‐process biogenic and fossil feedstocks and apply the carbon capture utilization and storage technology. Thus, these plants simultaneously sequester CO2 and synthesize fuels or chemicals. We consider an integrated steel mill that injects biomass into the blast furnace, captures CO2 for storage, and ferments CO into ethanol from the blast furnace gas. We examine two schemes to allocate the CO2 emissions avoided [due to the renewable feedstock share (biomass) and CO2 capture and storage (CCS)] to the products of steel, ethanol, and electricity (generated through the combustion of steel mill waste gases): 1) allocation by (carbon) mass, which represents actual carbon flows, and 2) a free-choice attribution that maximizes the renewable content allocated to electricity and ethanol. With respect to the chosen assumptions on process performance and heat integration, we find that allocation by mass favors steel and is unlikely to yield an ethanol product that fulfills the Renewable Energy Directive (RED) biofuel criterion (65% emission reduction relative to a fossil comparator), even when using renewable electricity and applying CCS to the blast furnace gas prior to CO conversion into ethanol and electricity. In contrast, attribution fulfills the criterion and yields bioethanol for electricity grid intensities <180 gCO2/kWhel without CCS and yields bioethanol for grid intensities up to 800 gCO2/kWhel with CCS. The overall emissions savings are up to 27 and 47% in the near-term and long-term future, respectively. The choice of the allocation scheme greatly affects the emissions intensities of cogenerated products. Thus, the set of valid allocation schemes determines the extent of flexibility that manufacturers have in producing low-carbon products, which is relevant for industries whose product target sectors that value emissions differently. We recommend that policymakers consider the emerging relevance of co‐processing in nonrefining facilities. Provided there is no double-accounting of emissions, policies should contain a reasonable degree of freedom in the allocation of emissions savings to low-carbon products, so as to promote the sale of these savings, thereby making investments in mitigation technologies more attractive to stakeholders.
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