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The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation

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  • Matthias Kalkuhl

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  • Ottmar Edenhofer
  • Kai Lessmann

Abstract

This paper takes the ‘policy failure’ in establishing a global carbon price for efficient emissions reduction as a starting point and analyzes to what extent technology policies can be a reasonable second-best approach. From a supply-side perspective, carbon capture and storage (CCS) policies differ substantially from renewable energy policies: they increase fossil resource demand and simultaneously lower emissions. We analyze CCS and renewable energy policies in a numerical dynamic general equilibrium model for settings of imperfect or missing carbon prices. We find that in contrast to renewable energy policies, CCS policies are not always capable of reducing emissions in the long run. If feasible, CCS policies can carry lower social costs compared to renewable energy policies, in particular when second-best policies are only employed temporally. In case fossil resources are abundant and renewable energy costs low, renewable energy policies perform better. Our results indicate that a pure CCS policy or a pure renewable energy policy carry their own specific risks of missing the environmental target. A smart combination of both, however, can be a robust and low-cost temporary second-best policy. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2015. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 55-80, January.
  • Handle: RePEc:kap:enreec:v:60:y:2015:i:1:p:55-80
    DOI: 10.1007/s10640-013-9757-5
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    References listed on IDEAS

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    Cited by:

    1. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2015. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 55-80, January.
    2. Matthias Weitzel, 2017. "The role of uncertainty in future costs of key CO2 abatement technologies: a sensitivity analysis with a global computable general equilibrium model," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 22(1), pages 153-173, January.
    3. Durmaz, Tunç, 2018. "The economics of CCS: Why have CCS technologies not had an international breakthrough?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 95(C), pages 328-340.
    4. Bertinelli, Luisito & Camacho, Carmen & Zou, Benteng, 2014. "Carbon capture and storage and transboundary pollution: A differential game approach," European Journal of Operational Research, Elsevier, vol. 237(2), pages 721-728.
    5. Grimaud, André & Rouge, Luc, 2014. "Carbon sequestration, economic policies and growth," Resource and Energy Economics, Elsevier, vol. 36(2), pages 307-331.
    6. Durmaz, Tunç & Schroyen, Fred, 2013. "Evaluating Carbon Capture and Storage in a Climate Model with Directed Technical Change," Discussion Paper Series in Economics 14/2013, Norwegian School of Economics, Department of Economics.
    7. Schroyen, Fred & Durmaz, Tunc, 2013. "Evaluating Carbon Capture and Storage in a Climate Model with Endogenous Technical Change," Discussion Paper Series in Economics 22/2019, Norwegian School of Economics, Department of Economics, revised 16 Oct 2019.
    8. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2012. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," CESifo Working Paper Series 3834, CESifo Group Munich.
    9. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2014. "Optimal Timing of CCS Policies under Decreasing Returns to Scale," TSE Working Papers 14-529, Toulouse School of Economics (TSE).
    10. Erik Gawel & Sebastian Strunz & Sonja Peterson & Hartmut Möllring & Carl-Friedrich Elmer & Martin Faulstich & Christian Hey & Felix Höffler, 2015. "Klimaabgabe für Kohlekraftwerke: Ein richtiger Schritt zur Erreichung des Klimaziels?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 68(14), pages 08-25, July.
    11. Hang Deng & Jeffrey M. Bielicki & Michael Oppenheimer & Jeffrey P. Fitts & Catherine A. Peters, 2017. "Leakage risks of geologic CO2 storage and the impacts on the global energy system and climate change mitigation," Climatic Change, Springer, vol. 144(2), pages 151-163, September.
    12. Matthias Weitzel, 2017. "Who gains from technological advancement? The role of policy design when cost development for key abatement technologies is uncertain," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(1), pages 151-181, January.

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