Author(s)

A. Magrini, A. Szklo, G. Machado & R. Schaeffer

Abstract

The trade-off between welfare and environmental quality is clear in the refining industry. Economic development and well-being are still related to oil product demands in contemporary society. However, the refining industry is usually aggressive to the environment, bringing externalities out to localities where facilities are built. Therefore, there is a dilemma between meeting national oil product demands growth and preventing environmental damages in the locations eligible for a green field project. This paper shows that Brazil should expand its refining industry over the next twenty years by two to four new refineries. One of these refineries, focused on petrochemicals, might be located close to major consumption centers. In this case, Rio de Janeiro State is an interesting option. The analysis indicates the trade-offs between the positive and negative external effects of a new refinery in the Itaguai Municipality. The advantages of good logistics and infrastructure might be offset by the cumulative environmental problems related to air, water and solid wastes management in the region. Keywords: refinery expansion, location, environmental pressure, Brazil. 1 Introduction The trade-off between welfare and environmental quality is particularly clear in the refining industry. Economic development and well-being are still closely related to oil product demands in contemporary society, despite relevant efforts to substitute and/or to save oil products after the Oil Shocks in the 70’s.

Keywords

refinery expansion, location, environmental pressure, Brazil.