Pricing CO2 as a dual commodity: Engineering-driven market design for CCUS deployment

This study develops an engineering-informed economic model to predict a viable CO₂ utilization/market price within the dual commodity framework of the EU Emissions Trading System (ETS). The model builds on a proposed Carbon Capture, Utilization, and Storage (CCUS) infrastructure that connects the Aphrodite Gas Field in Cyprus' Exclusive Economic Zone with major emitter nodes at the ports of Moni, Vassilikos, and Dhekelia, serving electricity and cement production. Cyprus' energy mix and associated emissions are forecast using three IPCC AR6 categories (C1, C3, and C6) via an hourly dispatch model in PLEXOS. This forecast covers fossil fuels, renewable integration, plans for the Great Sea Interconnector (GSI), and the production timeline for the Aphrodite Gas Field (2027–2045). The resulting emissions profile feeds into a reservoir engineering model that simulates CO₂ injection for Enhanced Gas Recovery (EGR). By applying displacement principles, the model quantifies the production increase due to EGR and estimates CO₂ utilization efficiency. This efficiency is then integrated into an economic framework that assesses cooperation among the three emitters and the Aphrodite field operator through cooperative game theory, after which the CO₂ utilization/market price is estimated. The analysis reveals an empty core, indicating the need for regulatory intervention via subsidization to secure cooperation. The CO₂ utilization/market price is then estimated, revealing a value influenced by engineering parameters rather than policy measures alone and offering a coordinated mechanism for expanding CCUS infrastructure with clear economic incentives.