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Optimal Timing of Carbon Capture Policies Under Alternative CCS Cost Functions

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  • Amigues, Jean-Pierre
  • Lafforgue, Gilles
  • Moreaux, Michel

Abstract

We determine the optimal exploitation time-paths of three types of perfect substitute energy resources: The first one is depletable and carbon-emitting (dirty coal), the second one is also depletable but carbon-free thanks to a carbon capture and storage (CCS) process (clean coal) and the last one is renewable and clean (solar energy). We assume that the atmospheric carbon stock cannot exceed some given ceiling. These optimal paths are considered along with alternative structures of the CCS cost function depending on whether the marginal sequestration cost depends on the flow of clean coal consumption or on its cumulated stock. In the later case, the marginal cost function can be either increasing in the stock thus revealing a scarcity effect on the storage capacity of carbon emissions, or decreasing in order to take into account some learning process. We show among others the following results: Under a stockdependent CCS cost function, the clean coal exploitation must begin at the earliest when the carbon cap is reached while it must begin before under a flow-dependent cost function. Under stock-dependent cost function with a dominant learning effect, the energy price path can evolve non-monotonically over time. When the solar cost is low enough, this last case can give rise to an unusual sequence of energy consumption along which the solar energy consumption is interrupted for some time and replaced by the clean coal exploitation. Last, the scarcity effect implies a carbon tax trajectory which is also unusual in this kind of ceiling models, its increasing part been extended for some time during the period at the ceiling.

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Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 12-318.

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Date of creation: Apr 2012
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Handle: RePEc:tse:wpaper:26012

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Keywords: Carbon capture and storage; Energy substitution; Learning effect; Scarcity effect; Carbon stabilization cap.;

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References

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  1. Alain Ayong Le Kama & Mouez Fodha & LAFFORGUE Gilles, 2009. "Optimal Carbon Capture and Storage policies," LERNA Working Papers 09.24.300, LERNA, University of Toulouse.
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  6. Grimaud, André & Lafforgue, Gilles & Magné, Bertrand, 2009. "Climate Change Mitigation Options and Directed Technical Change: A Decentralized Equilibrium Analysis," TSE Working Papers 09-063, Toulouse School of Economics (TSE).
  7. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2011. "Would hotelling kill the electric car?," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 281-296, May.
  8. Amigues, Jean-Pierre & Moreaux, Michel & Schubert, Katheline, 2011. "Optimal use of a polluting non renewable resource generating both manageable and catastrophic damages," LERNA Working Papers 11.10.344, LERNA, University of Toulouse.
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  12. Chakravorty, Ujjayant & Magne, Bertrand & Moreaux, Michel, 2006. "A Hotelling model with a ceiling on the stock of pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2875-2904, December.
  13. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Research Department of Statistics Norway.
  14. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2011. "Optimal CCS and air capture from heterogeneous energy consuming sectors," LERNA Working Papers 11.16.350, LERNA, University of Toulouse.
  15. Kurosawa, Atsushi, 2004. "Carbon concentration target and technological choice," Energy Economics, Elsevier, vol. 26(4), pages 675-684, July.
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  18. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2006. "Optimal Sequestration Policy with a Ceiling on the Stock of Carbon in the Atmosphere," IDEI Working Papers 401, Institut d'Économie Industrielle (IDEI), Toulouse.
  19. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-74, November.
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Citations

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Cited by:
  1. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2012. "Optimal timing of CCS policies with heterogeneous energy consumption sectors," LERNA Working Papers 12.13.370, LERNA, University of Toulouse.
  2. Moreaux, Michel & Withagen, Cees, 2013. "Climate Change and Carbon Capture and Storage," TSE Working Papers 13-393, Toulouse School of Economics (TSE).
  3. Niko Jaakkola, 2013. "Monopolistic Sequestration of European Carbon Emissions," OxCarre Working Papers 098, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.

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