Negative emissions and ambitious climate policies in a second best world: A general equilibrium assessment of technology options in the electricity sector

This paper examines the role of electricity production from biomass with and without carbon capture and storage in sustaining low CO 2 emission pathways to 2100. It quantifies the effect of the availability of biomass resources and technologies within a general equilibrium framework. We assess the robustness of this technology, with and without carbon capture and storage, as a way of reaching the 550 ppm stabilization target. The impact of a uniform CO2 tax on energy prices and world GDP is examined, together with the structure of the electricity mix. The influence of additional climate mitigation policies, such as alternative recycling of tax revenues and infrastructure policies is also discussed.Biomass-fed integrated gasification combined cycle technology is introduced into the electricity module of IMACLIM-R, a hybrid general equilibrium model. The modeling exercise has revealed the sometimes complex dynamics of the links between electricity production and prices, fossil fuel markets and demand for energy at various time horizons. The availability of carbon capture and storage creates a path dependency and conditions the evolution of the electricity mix and the low availability of biomass resources can result in very high unforeseen economic costs. CCS technologies are beneficial to the economy in the short to medium term, when fossil fuel resources remain available and relatively cheap. However, in the longer term, economies are locked in an electricity mix that is greatly dependent on the use of fossil fuels. The unavailability of CCS combined with the low availability of biomass resources induces extremely high costs in the long term. Without CCS, the use of biomass then becomes one of the few remaining options to produce low-carbon electricity, making biomass a robust technology option. The macroeconomic cost of climate mitigation is in part driven by the increase in production costs in all sectors and the increase in consumer prices, due to higher fossil fuel prices. The study revealed that additional policy options should be implemented to achieve ambitious climate objectives. In particular, the combination of recycling tax revenues to reduce labor taxes and the implementation of infrastructure policies may induce net economic benefits.