WRI and Standard & Poor’s were unable to conduct a full assessment of credit quality per subsector under EPA regulation because of limited information on the EPA’s anticipated regulatory approach and stringency.
Instead, using two key characteristics the EPA is likely to prioritize when developing regulations— absolute emissions and the potential to reduce emissions—WRI determined that likely regulatory priorities among the 13 subsectors include petrochemical, all other basic organic, and nitrogenous fertilizer producers (see figure 10). It is important to note that the likelihood of regulation does not necessarily translate to negative credit impact. For example, some companies’ facilities may already meet EPA regulatory thresholds. In addition, some emissions reductions may be relatively cheap, such as N2O reductions in nitric acid and adipic acid production, and may not necessarily have a material impact. Finally, the EPA will also consider other key criteria, particularly cost feasibility and the remaining useful life of facilities, which could limit compliance requirements and resulting costs.