From Gross to Net: Carbon Dioxide Removal in an Analytic Climate Economy

Carbon dioxide removal (CDR) is considered essential for climate change mitigation, yet its optimal role in climate policy remains unclear in the presence of non-permanent storage, energy constraints, and fossil fuel scarcity. We integrate CDR into an analytic integrated assessment model to derive general conditions for socially optimal CDR deployment. Within a linear carbon cycle model, we consider different CDR pathways, including direct air carbon capture, ocean alkalinity enhancement, and ocean iron fertilization. Introducing CDR does not significantly alter the optimal carbon price and the incentive to reduce emissions. The impact of CDR on gross emissions mainly stems from the energy required to operate it. This impact, as well as the optimal deployment of CDR, depends on fossil fuel scarcity and the pace of renewable energy deployment. In high-damage scenarios, the optimal deployment of CDR occurs before and around the year 2100, consistent with temperature overshoot pathways.