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The widespread adoption of CO2 capture and storage (CCS)a key factor in combating climate change, requires the joint adoption of these technologies by independent players: emitters, transporters, storers, policy-makers.

In a liberalized economy, it is necessary to create the conditions for a coordinated approach between these individual decision-makers. Game theory, designed precisely to study these strategic interactions between independent players, has guided various studies conducted recently at IFP School.

The first of these studies demonstrated that coordinating the decisions of emitters and a CO2 pipeline operator is similar to the creation of a club of emitters sharing a common infrastructure(1). Due to the heterogeneity of players, the value of the tax on CO2 emissions, required for the existence of the club, must be greater than the average cost of capture, transport and storage. In addition, obliging a transporter to use a non-discriminatory tariff structure can raise this minimum price or even jeopardize the feasibility of a CCS project. These results therefore call into question the tariff regulation applied to COpipelines.

The second of these studies focused on “carrot and stick”a type of incentive policies that could be proposed to encourage the adoption of this technology(2). In this case, the “carrot” takes the form of fiscal incentivesb to reward emitters installing CCS systems without waiting until the last moment; with their decision helping to bring down the cost of CCS via learning effects. In an American case it was demonstrated that it was essential to take into account the strategic interactions among the emitters because otherwise the cost of the fiscal incentives required is significantly under-estimated.

These innovative approaches help provide a clearer understanding of the CCS economy with a view to adapting the public policies that will accompany its development.

 

Comparison of the cost of the fiscal incentives required for adoption of CCS in the USA.
Comparison of the cost of the fiscal incentives required for adoption of CCS in the USA.

 

a- For example: the requirement placed on thermal power stations to achieve, by an announced future point in time, a restrictive threshold of emissions per kWh, requiring the adoption of capture.
    
b- For example: investment and operational subsidies.

 


(1)  O. Massol, S. Tchung-Ming, A. Banal-Estañol, (2015), Joining the CCS club! The economics of CO2 pipeline projects - European Journal of Operational Research, 247(1), 259-275, ISSN 0377-2217
>> DOI: 10.1016/j.ejor.2015.05.034 
    
(2)  A. Banal-Estañol, J. Eckhause, O. Massol, (2016). Incentives for early adoption of carbon capture technology: Further considerations from a European perspective - Energy Policy, 90, 246-252, ISSN 0301-4215. 
>> DOI: 10.1016/j.enpol.2015.12.006

 

 


Scientific contact: olivier.massol@ifpen.fr

>> ISSUE 29 OF SCIENCE@IFPEN