IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v406y2026ics0306261925019440.html

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

Author

Listed:
  • Giakoumi, Matheos
  • Konstantinou, Charalampos
  • Ciola, Emanuele
  • Papanastasiou, Panos
  • Pontoni, Federico

Abstract

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.

Suggested Citation

  • Giakoumi, Matheos & Konstantinou, Charalampos & Ciola, Emanuele & Papanastasiou, Panos & Pontoni, Federico, 2026. "Pricing CO2 as a dual commodity: Engineering-driven market design for CCUS deployment," Applied Energy, Elsevier, vol. 406(C).
    • Handle: RePEc:eee:appene:v:406:y:2026:i:c:s0306261925019440
    DOI: 10.1016/j.apenergy.2025.127214
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261925019440
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2025.127214?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.

    References listed on IDEAS

    as
    1. Jagu Schippers, Emma & Massol, Olivier, 2022. "Unlocking CO2 infrastructure deployment: The impact of carbon removal accounting," Energy Policy, Elsevier, vol. 171(C).
    2. Massol, Olivier & Tchung-Ming, Stéphane & Banal-Estañol, Albert, 2015. "Joining the CCS club! The economics of CO2 pipeline projects," European Journal of Operational Research, Elsevier, vol. 247(1), pages 259-275.
    3. Emma Jagu & Olivier Massol, 2022. "Unlocking CO2 Infrastructure Deployment: The Impact of Carbon Removal Accounting," Working Papers hal-03898138, HAL.
    4. Pao-Yu Oei & Roman Mendelevitch, 2016. "European Scenarios of CO2 Infrastructure Investment until 2050," The Energy Journal, , vol. 37(3_suppl), pages 171-194, December.
    5. Massol, Olivier & Tchung-Ming, Stéphane & Banal-Estañol, Albert, 2018. "Capturing industrial CO2 emissions in Spain: Infrastructures, costs and break-even prices," Energy Policy, Elsevier, vol. 115(C), pages 545-560.
    6. Shen Gao & Chenghan Hou & Long Zhao, 2022. "On the economics of CO2 contracts in the enhanced oil recovery industry," Journal of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 802-818, December.
    7. Cathrine Hellerschmied & Johanna Schritter & Niels Waldmann & Artur B. Zaduryan & Lydia Rachbauer & Kerstin E. Scherr & Anitha Andiappan & Stephan Bauer & Markus Pichler & Andreas P. Loibner, 2024. "Hydrogen storage and geo-methanation in a depleted underground hydrocarbon reservoir," Nature Energy, Nature, vol. 9(3), pages 333-344, March.
    8. Biagi, James & Agarwal, Ramesh & Zhang, Zheming, 2016. "Simulation and optimization of enhanced gas recovery utilizing CO2," Energy, Elsevier, vol. 94(C), pages 78-86.
    9. Gao, Shen & van ’t Veld, Klaas, 2021. "Pegging input prices to output prices—A special price adjustment clause in long-term CO2 sales contracts," Energy Economics, Elsevier, vol. 104(C).
    10. repec:hal:journl:hal-04292880 is not listed on IDEAS
    11. Despina Yiakoumi & Constantinos Taliotis & Theodoros Zachariadis & Steven Griffiths, 2023. "Sharing the decarbonisation effort: getting Eastern Mediterranean and Middle East countries on the road to global carbon neutrality," Climate Policy, Taylor & Francis Journals, vol. 23(7), pages 916-928, August.
    12. repec:aen:journl:ej37-si3-mendelevitch is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yan, Beibei & Zhang, Rui & Yuan, Zhuang & Wang, Zhi & Li, Jian & Zhou, Shengquan & Zhu, Xiaochao & Chen, Guanyi, 2026. "Insights into the role of gasification media in gasification process: Principles, advantages, bottlenecks and prospects," Applied Energy, Elsevier, vol. 409(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bardon, Paul & Massol, Olivier, 2025. "Decarbonizing aviation with sustainable aviation fuels: Myths and realities of the roadmaps to net zero by 2050," Renewable and Sustainable Energy Reviews, Elsevier, vol. 211(C).
    2. Nicolle, Adrien & Massol, Olivier, 2023. "Build more and regret less: Oversizing H2 and CCS pipeline systems under uncertainty," Energy Policy, Elsevier, vol. 179(C).
    3. Jagu Schippers, Emma & Massol, Olivier, 2022. "Unlocking CO2 infrastructure deployment: The impact of carbon removal accounting," Energy Policy, Elsevier, vol. 171(C).
    4. Albert Banal-Estañol & Jeremy Eckhause & Olivier Massol, 2015. "Incentives for early adoption of carbon capture technology: further considerations from a European perspective," Working Papers hal-02475485, HAL.
    5. Massol, Olivier & Tchung-Ming, Stéphane & Banal-Estañol, Albert, 2018. "Capturing industrial CO2 emissions in Spain: Infrastructures, costs and break-even prices," Energy Policy, Elsevier, vol. 115(C), pages 545-560.
    6. Cheng Cao & Hejuan Liu & Zhengmeng Hou & Faisal Mehmood & Jianxing Liao & Wentao Feng, 2020. "A Review of CO 2 Storage in View of Safety and Cost-Effectiveness," Energies, MDPI, vol. 13(3), pages 1-45, January.
    7. Esfandyari, Hamid & Safari, Alireza & Hashemi, Ali & Hassanpouryouzband, Aliakbar & Haghighi, Manouchehr & Keshavarz, Alireza & Zeinijahromi, Abbas, 2024. "Surface interaction changes in minerals for underground hydrogen storage: Effects of CO2 cushion gas," Renewable Energy, Elsevier, vol. 237(PB).
    8. Abada, Ibrahim & Ehrenmann, Andreas & Lambin, Xavier, 2025. "Risk-sharing in energy communities," European Journal of Operational Research, Elsevier, vol. 322(3), pages 870-888.
    9. Li, Zezheng & Zhu, Nenggao & Wen, Xin & Liu, Yu, 2025. "Assessment the impact of power generation hours on the abatement costs of CCUS on coal-fired power plants in China," Energy Economics, Elsevier, vol. 144(C).
    10. van Beek, Andries & Groote Schaarsberg, Mirjam & Borm, Peter & Hamers, Herbert & Veneman, Mattijs, 2023. "Cost Allocation in CO2 Transport for CCUS Hubs : A Multi-Actor Perspective," Other publications TiSEM 4f99c444-6676-4887-b7b8-5, Tilburg University, School of Economics and Management.
    11. Jian Jun, Eugene Chai & Foo, Henry Chee Yew & Ben Mahmud, Hisham Khaled & Wei, Lau Shiew & Bennour, Ziad, 2026. "Cement integrity challenges associated with underground hydrogen storage: A review of geochemistry and microbial activity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 228(C).
    12. Peter Viebahn & Emile J. L. Chappin, 2018. "Scrutinising the Gap between the Expected and Actual Deployment of Carbon Capture and Storage—A Bibliometric Analysis," Energies, MDPI, vol. 11(9), pages 1-45, September.
    13. Xiong, Zanfu & Du, Qingjun & Hou, Jian & Liu, Ruixin & Liu, Yongge & Zheng, Haoyu & Zhou, Kang & Zhang, Yang, 2025. "Numerical simulation of cyclic hydrogen storage in depleted gas reservoirs: considering microbial growth and hydrogen consumption," Energy, Elsevier, vol. 328(C).
    14. Puyan Bakhshi & Riyaz Kharrat & Abdolnabi Hashemi & Mehdi Zallaghi, 2018. "Experimental evaluation of carbonated waterflooding: A practical process for enhanced oil recovery and geological CO2 storage," Greenhouse Gases: Science and Technology, Blackwell Publishing, vol. 8(2), pages 238-256, April.
    15. Baicen Lin & Yunsheng Wei & Shusheng Gao & Liyou Ye & Huaxun Liu & Wenqing Zhu & Jianzhong Zhang & Donghuan Han, 2024. "Current Progress and Development Trend of Gas Injection to Enhance Gas Recovery in Gas Reservoirs," Energies, MDPI, vol. 17(7), pages 1-24, March.
    16. Wu, Lin & Hou, Zhengmeng & Luo, Zhifeng & Fang, Yanli & Mao, Jinhua & Qin, Nan & Guo, Yilin & Zhang, Tian & Cai, Nan, 2024. "Site selection for underground bio-methanation of hydrogen and carbon dioxide using an integrated multi-criteria decision-making (MCDM) approach," Energy, Elsevier, vol. 306(C).
    17. Ismail Ismail & Vassilis Gaganis, 2023. "Carbon Capture, Utilization, and Storage in Saline Aquifers: Subsurface Policies, Development Plans, Well Control Strategies and Optimization Approaches—A Review," Clean Technol., MDPI, vol. 5(2), pages 1-29, May.
    18. Lezhen Wu & Xiaole Wu & Yu Zhou, 2023. "Commitment strategies and inventory decisions under supply disruption risk," Production and Operations Management, Production and Operations Management Society, vol. 32(8), pages 2619-2637, August.
    19. Ke, Wan & Zhou, Xiaoyang & Lev, Benjamin & Shen, Wenjing, 2025. "Strategic Inventory with an Unreliable Manufacturer across Multiple Supply Chain Structures," Omega, Elsevier, vol. 133(C).
    20. Gu, Changwan & Li, Kai & Gao, Shikang & Li, Jiayu & Mao, Yifan, 2024. "CO2 abatement feasibility for blast furnace CCUS retrofits in BF-BOF steel plants in China," Energy, Elsevier, vol. 294(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    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:eee:appene:v:406:y:2026:i:c:s0306261925019440. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    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.