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European Scenarios of CO2 Infrastructure Investment until 2050

Pao-Yu Oei and Roman Mendelevitch

Year: 2016
Volume: Volume 37
Number: Sustainable Infrastructure Development and Cross-Border Coordination
DOI: https://doi.org/10.5547/01956574.37.SI3.poei
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Abstract:
Based on a review of the current state of the Carbon Capture, Transport and Storage (CCTS) technology, this paper analyzes the layout and costs of a potential CO2 infrastructure in Europe at the horizon of 2050. We apply the mixed-integer model CCTS-Mod to compute a CCTS infrastructure network for Europe, examining the effects of different CO2 price paths with different regional foci. Scenarios assuming low CO2 certificate prices lead to hardly any CCTS development in Europe. The iron and steel sector starts deployment once the CO2 certificate prices exceed 50 €/tCO2. The cement sector starts investing at a threshold of 75 €/tCO2, followed by the electricity sector when prices exceed 100 €/tCO2. The degree of CCTS deployment is found to be more sensitive to variable costs of CO2 capture than to investment costs. Additional revenues generated from utilizing CO2 for enhanced oil recovery (CO2-EOR) in the North Sea would lead to an earlier adoption of CCTS, independent of the CO2 certificate price; this case may become especially relevant for the UK, Norway and the Netherlands. However, scattered CCTS deployment increases unit cost of transport and storage infrastructure by 30% or more.



Promoting CCS in Europe: A Case for Green Strategic Trade Policy?

Finn Roar Aune, Simen Gaure, Rolf Golombek, Mads Greaker, Sverre A.C. Kittelsen, and Lin Ma

Year: 2022
Volume: Volume 43
Number: Number 6
DOI: 10.5547/01956574.43.6.faun
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Abstract:
According to IEA (2018), there is a huge gap between the first-best social optimal utilization of Carbon Capture and Storage (CCS) technologies to lower global CO2 emissions and the current, negligible diffusion of this technology. This calls for a financial support mechanism for CCS. We study to what extent promotion of CCS in Europe should be through subsidizing development and production of CCS technologies—an upstream subsidy—or by subsidising the purchasers of CCS technologies—a downstream subsidy. This question is examined theoretically in a stylized model and numerically by using a new approach that integrates strategic trade policy with an economic model of the European energy markets. The theory model suggests that upstream subsidies should clearly be preferred, and this is confirmed by the numerical simulations. For the European power market, the numerical simulations suggest that subsidies to CCS coal power should exceed subsidies to CCS gas power.



Mitigating Climate Change While Producing More Oil: Economic Analysis of Government Support for CCS-EOR

Hossa Almutairi and Axel Pierru

Year: 2024
Volume: Volume 45
Number: Special Issue
DOI: 10.5547/01956574.44.SI1.halm
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Abstract:
By storing CO2 captured from the atmosphere or point sources into oil fields, carbon capture and storage with enhanced oil recovery (CCS-EOR) increases the fields' output by raising reservoir pressures. Since CO2-EOR has been experimented with for decades and the revenues from the additional oil production improve projects' economics, CCS-EOR is the most readily deployable CCS technology. However, government support for CCS-EOR projects is sometimes contested on the grounds that the resulting increase in oil production undermines their environmental benefits. Addressing this concern requires determining the effects of implementing CCS-EOR on global CO2 emissions. This paper presents a simple approach based on a marginal reasoning consistent with economic decision-making. It produces analytical formulas that account for the effects on the global oil market of incentivizing CCS-EOR. In addition, we quantify the volume of oil that can be decarbonized by storing a ton of captured CO2 through EOR from different perspectives. We produce numerical results based on a first-cut calibration. They suggest that, from an economic perspective, CCS-EOR is a technology that mitigates global emissions. However, after accounting for the need to decarbonize the EOR oil, the reduction in emissions is significantly less than the stored quantity of CO2. If fully allocated to oil production, the environmental benefits of capturing a ton of CO2 and storing it through conventional EOR can allow the oil producer to decarbonize 3.4 barrels on a well-to-wheel basis and 14.4 barrels when offsetting its oil-upstream emissions only. Fiscal incentives granted by governments to support CCS-EOR as a climate-change mitigation technology should be sized accordingly. We compare our findings to the size of the subsidy in the revised Section 45Q of the 2022 United States Inflation Reduction Act.





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