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Pricing Contracts Under Uncertainty in a Carbon Capture and Storage Framework

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Listed:
  • Cai, W.
  • Singham, D.I.
  • Craparo, E.M.
  • White, J.A.

Abstract

Carbon capture and storage (CCS) has been demonstrated as a viable option for reducing carbon emissions to the atmosphere. We consider a situation where a tax on emissions is imposed on carbon dioxide (CO2) producers to encourage their participation in CCS. Operators of CO2 transportation pipelines and storage sites enter into individual contracts with emissions producers to store CO2. We study the problem of selecting the optimal price and volume of these contracts under both cost and emissions uncertainty to optimize the storage operator's expected profit.

Suggested Citation

  • Cai, W. & Singham, D.I. & Craparo, E.M. & White, J.A., 2014. "Pricing Contracts Under Uncertainty in a Carbon Capture and Storage Framework," Energy Economics, Elsevier, vol. 43(C), pages 56-62.
    • Handle: RePEc:eee:eneeco:v:43:y:2014:i:c:p:56-62
    DOI: 10.1016/j.eneco.2014.02.003
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    References listed on IDEAS

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    1. Kemp, Alexander G. & Sola Kasim, A., 2010. "A futuristic least-cost optimisation model of CO2 transportation and storage in the UK/UK Continental Shelf," Energy Policy, Elsevier, vol. 38(7), pages 3652-3667, July.
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    4. Middleton, Richard S. & Eccles, Jordan K., 2013. "The complex future of CO2 capture and storage: Variable electricity generation and fossil fuel power," Applied Energy, Elsevier, vol. 108(C), pages 66-73.
    5. Jenny Sumner & Lori Bird & Hillary Dobos, 2011. "Carbon taxes: a review of experience and policy design considerations," Climate Policy, Taylor & Francis Journals, vol. 11(2), pages 922-943, March.
    6. Klokk, Ø. & Schreiner, P.F. & Pagès-Bernaus, A. & Tomasgard, A., 2010. "Optimizing a CO2 value chain for the Norwegian Continental Shelf," Energy Policy, Elsevier, vol. 38(11), pages 6604-6614, November.
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    Citations

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    Cited by:

    1. 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.
    2. Rahman, Farahiyah Abdul & Aziz, Md Maniruzzaman A. & Saidur, R. & Bakar, Wan Azelee Wan Abu & Hainin, M.R & Putrajaya, Ramadhansyah & Hassan, Norhidayah Abdul, 2017. "Pollution to solution: Capture and sequestration of carbon dioxide (CO2) and its utilization as a renewable energy source for a sustainable future," Renewable and Sustainable Energy Reviews, Elsevier, vol. 71(C), pages 112-126.
    3. Singham, D.I., 2019. "Sample average approximation for the continuous type principal-agent problem," European Journal of Operational Research, Elsevier, vol. 275(3), pages 1050-1057.
    4. Cai, W. & Singham, D.I., 2018. "A principal–agent problem with heterogeneous demand distributions for a carbon capture and storage system," European Journal of Operational Research, Elsevier, vol. 264(1), pages 239-256.
    5. Valentina Kashintseva & Wadim Strielkowski & Justas Streimikis & Tatiana Veynbender, 2018. "Consumer Attitudes towards Industrial CO 2 Capture and Storage Products and Technologies," Energies, MDPI, vol. 11(10), pages 1-14, October.
    6. Nicolle, Adrien & Massol, Olivier, 2023. "Build more and regret less: Oversizing H2 and CCS pipeline systems under uncertainty," Energy Policy, Elsevier, vol. 179(C).
    7. Adrien Nicolle & Diego Cedreros & Olivier Massol & Emma Jagu Schippers, 2023. "Modeling CO2 Pipeline Systems : An Analytical Lens for CCS Regulation," Working Papers hal-04087681, HAL.

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    More about this item

    Keywords

    Carbon capture and storage; Pricing; Uncertainty quantification;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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