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International Transport of Captured $$\hbox {CO}_2$$ CO 2 : Who Can Gain and How Much?

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  • Joris Morbee

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Abstract

If carbon capture and storage (CCS) is to become a viable option for low-carbon power generation, its deployment will require the construction of dedicated CO 2 transport infrastructure. In a scenario of large-scale deployment of CCS in Europe by 2050, the optimal (cost-minimising) CO 2 transport network would consist of large international bulk pipelines from the main CO 2 source regions to the CO 2 sinks in hydrocarbon fields and saline aquifers, which are mostly located in the North Sea. In this paper, we use a Shapley value approach to analyse the multilateral negotiation process that would be required to develop such jointly optimised CO 2 infrastructure. First, we find that countries with excess storage capacity capture 38–45 % of the benefits of multilateral coordination, implying that the resource rent of a depleted hydrocarbon field (when used for CO 2 storage) is roughly $${\$}1$$ $ 1 per barrel of original recoverable oil reserves, or $${\$}2$$ $ 2 per boe (barrel of oil equivalent) of original recoverable gas reserves. This adds 25–600 % to current estimates of CO 2 storage cost. Second, countries with a strategic transit location capture 19 % of the rent in the case of national pipeline monopolies. Liberalisation of CO 2 pipeline construction at EU level could eliminate the transit rent and is shown to reduce by two-thirds the differences between countries in terms of cost per tonne of CO 2 exported. Reaching agreement on such liberalisation may be politically challenging, since the payoffs are shown to be strongly divergent across countries. Copyright The Author(s) 2014

Suggested Citation

  • Joris Morbee, 2014. "International Transport of Captured $$\hbox {CO}_2$$ CO 2 : Who Can Gain and How Much?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(3), pages 299-322, March.
  • Handle: RePEc:kap:enreec:v:57:y:2014:i:3:p:299-322
    DOI: 10.1007/s10640-013-9670-y
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    References listed on IDEAS

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    1. Roman Mendelevitch & Johannes Herold & Pao-Yu Oei & Andreas Tissen, 2010. "CO2 Highways for Europe: Modeling a Carbon Capture, Transport and Storage Infrastructure for Europe," Discussion Papers of DIW Berlin 1052, DIW Berlin, German Institute for Economic Research.
    2. Joris Morbee & Stef Proost, 2010. "Russian Gas Imports in Europe: How Does Gazprom Reliability Change the Game?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 79-110.
    3. László Á. Kóczy & Dávid Csercsik, 2011. "Externalities in the games over electrical power transmission networks," Working Paper Series 1103, Óbuda University, Keleti Faculty of Business and Management.
    4. Franz Hubert & Svetlana Ikonnikova, 2011. "Investment Options And Bargaining Power: The Eurasian Supply Chain For Natural Gas," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 85-116, March.
    5. Albrecht, Johan & Francois, Delphine & Schoors, Koen, 2002. "A Shapley decomposition of carbon emissions without residuals," Energy Policy, Elsevier, vol. 30(9), pages 727-736, July.
    6. Hobbs, Benjamin F. & Kelly, Kevin A., 1992. "Using game theory to analyze electric transmission pricing policies in the United States," European Journal of Operational Research, Elsevier, vol. 56(2), pages 154-171, January.
    7. Kleindorfer, Paul R. & Wu, D. -J. & Fernando, Chitru S., 2001. "Strategic gaming in electric power markets," European Journal of Operational Research, Elsevier, vol. 130(1), pages 156-168, April.
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