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Investing in carbon transportation under volume uncertainty and scaling flexibility

Author

Listed:
  • Andersen, Sveinung
  • Hagspiel, Verena
  • Oliveira, Carlos
  • Røsbjørgen, Jan Magnus

Abstract

The transition to climate neutrality requires significant expansion of carbon capture and storage (CCS) infrastructure. However, uncertainty in CO2 volumes and prices creates challenges for transport and storage (T&S) operators in determining optimal investment strategies. This study develops a real options analysis (ROA) framework to evaluate investment decisions in large-scale, open-access T&S infrastructure, comparing flexible ship-based transport with cost-effective trunklines. Our results show that, while net present value analysis favors trunklines, ROA demonstrates that ship-based solutions provide greater value due to scalability and shorter lead times. Investment thresholds remain high (400–600 €/tCO2), underscoring the need for targeted policy measures to reduce uncertainty and accelerate CCS deployment.

Suggested Citation

  • Andersen, Sveinung & Hagspiel, Verena & Oliveira, Carlos & Røsbjørgen, Jan Magnus, 2026. "Investing in carbon transportation under volume uncertainty and scaling flexibility," Energy Economics, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:eneeco:v:153:y:2026:i:c:s0140988325008941
    DOI: 10.1016/j.eneco.2025.109064
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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