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How U.S. Federal Climate Policy Could Affect Chemicals’ Credit Risk

This study, conducted with Standard & Poors Rating Services, examines how climate change policy drivers could be incorporated into the evaluation of credit quality. It analyzes two types of federal climate policy scenarios – (1) a market-based GHG emissions reduction policy as approximated by the American Power Act (APA), and (2) Environmental Protection Agency (EPA) regulation of greenhouse gas emissions (GHG) – in the context of 13 energy-intensive chemicals subsectors.

Key Findings

Executive Summary

In the first part of the analysis, WRI describes scenarios under two types of potential federal climate policy—an economy-wide market-based system (specifically, cap-and-trade legislation) and Environmental Protection Agency (EPA) regulation of GHGs. In the second part, WRI and, in certain discrete issues, Standard & Poor’s look at how these policy scenarios could influence credit risk factors in 13 greenhouse gas-intensive chemicals subsectors. In the final, third part, Standard & Poor’s applies these findings.

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