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A game-theoretic real options approach to CCUS investment decisions: Comparative analysis of business models under market and policy uncertainties

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  • Xie, Xiaoyu
  • Lan, Rujia
  • Li, Xiangqian
  • Li, Jizhe

Abstract

Carbon Capture, Utilization, and Storage (CCUS) is crucial for net-zero emissions but faces challenges like high costs and an immature carbon market. To address these challenges, it is imperative to scientifically assess these risks and determine the optimal investment timing within the carbon market. Focusing on China's power sector, this study proposes a CCUS standard (SROG) and an evolutionary real options-game (EROG) model to evaluate the impact of various incentives on CCUS projects and analyze investment probabilities under two key business models. The findings reveal that tax credits are the most influential factor, reducing the optimal investment thresholds by over 76.4 %, while technical learning has a minimal impact, with a maximum threshold reduction of only 1.55 % even under maximum subsidies. Using the SROG framework, this study projects that the optimal investment threshold of 295 CNY/tCO₂ will be achieved by 2033—significantly earlier than estimates from NPV (2039) and RO models (2043). This underscores the advantage of incorporating game-theoretic interactions, which incentivize earlier investment. Furthermore, by explicitly modeling market dynamics, the EROG model shows that stable carbon-price growth can cut the shift from a vertically integrated to an operator-type model to just 3–5 years, underscoring the value of steady market expansion.

Suggested Citation

  • Xie, Xiaoyu & Lan, Rujia & Li, Xiangqian & Li, Jizhe, 2026. "A game-theoretic real options approach to CCUS investment decisions: Comparative analysis of business models under market and policy uncertainties," Technological Forecasting and Social Change, Elsevier, vol. 223(C).
    • Handle: RePEc:eee:tefoso:v:223:y:2026:i:c:s0040162525004482
    DOI: 10.1016/j.techfore.2025.124417
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