IDEAS home Printed from https://ideas.repec.org/a/anr/reseco/v17y2025p301-321.html

The Economics of Carbon Dioxide Removal

Author

Listed:
  • Ottmar Edenhofer

    (Potsdam Institute for Climate Impact Research, Potsdam, Germany
    Faculty VI: Planning, Building, Environment, Technische Universität Berlin, Berlin, Germany
    Faculty VII: Economics and Management, Technische Universität Berlin, Berlin, Germany)

  • Max Franks

    (Potsdam Institute for Climate Impact Research, Potsdam, Germany
    Faculty VI: Planning, Building, Environment, Technische Universität Berlin, Berlin, Germany)

  • Friedemann Gruner

    (Potsdam Institute for Climate Impact Research, Potsdam, Germany
    Faculty of Economics and Social Sciences, University of Potsdam, Potsdam, Germany
    Berlin School of Economics, Berlin, Germany)

  • Matthias Kalkuhl

    (Potsdam Institute for Climate Impact Research, Potsdam, Germany
    Faculty of Economics and Social Sciences, University of Potsdam, Potsdam, Germany)

  • Kai Lessmann

    (Potsdam Institute for Climate Impact Research, Potsdam, Germany)

Abstract

Carbon dioxide removal (CDR) is an emerging topic in climate policy. We review the nascent economic literature on the governance of CDR and discuss policy design and institutions. We first assess the role of CDR in climate policy portfolios that include abatement and adaptation. Cost-saving technological progress could make CDR a game changer in climate policy: CDR creates new sectoral, intertemporal, and international flexibilities, which reduce overall costs and allow a return to a temperature target after temporary overshooting. Moreover, CDR can reduce the problem of international cooperation due to substantially lower supply-side leakage via fossil fuel markets. A key challenge lies in its governance and incentive structure, which are complicated by the nonpermanence of carbon storage and default risks of the firms committed to future CDR. For CDR governance, we survey approaches that incentivize removals by price instruments or include CDR in (modified) emissions trading schemes.

Suggested Citation

  • Ottmar Edenhofer & Max Franks & Friedemann Gruner & Matthias Kalkuhl & Kai Lessmann, 2025. "The Economics of Carbon Dioxide Removal," Annual Review of Resource Economics, Annual Reviews, vol. 17(1), pages 301-321, October.
    • Handle: RePEc:anr:reseco:v:17:y:2025:p:301-321
    DOI: 10.1146/annurev-resource-010224-094505
    as

    Download full text from publisher

    File URL: https://doi.org/10.1146/annurev-resource-010224-094505
    Download Restriction: Full text downloads are only available to subscribers. Visit the abstract page for more information.
    File URL: https://libkey.io/10.1146/annurev-resource-010224-094505?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:anr:reseco:v:17:y:2025:p:301-321. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: http://www.annualreviews.org (email available below). General contact details of provider: http://www.annualreviews.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.