Kickstarting Carbon Capture and Storage adoption: Tailoring subsidies to emitters’ needs

Despite being an essential technology in industrial decarbonization scenarios, Carbon Capture and Storage (CCS) struggles to achieve large-scale deployment. Indeed, emitters face a coordination problem, which prevents them from forming the critical mass the transportation operator needs to develop a network that leverages economies of scale. In response, many public entities have multiplied financing mechanisms to support CCS adoption. However, current subsidy mechanisms overlook the network infrastructure and do not acknowledge the heterogeneity of emitters. Similarly, no study in the literature addresses the issue of distributing subsidies to heterogeneous emitters while considering the transportation network. Thus, this paper introduces a methodology for distributing subsidies among industrial emitters based on their capture costs and network cost contribution while accounting for budgetary constraints. Firstly, we evaluate each emitter's contribution to the network cost through the Shapley value. Secondly, we define each emitter's subsidy claim by combining previous results with their capture cost. We then distribute the subsidies according to the Proportional bankruptcy solution. We justify this solution based on properties (axioms) we desire our subsidy distribution to verify. A key feature of our methodology is its flexibility. Indeed, each step can be adapted to suit the normative framework that a policymaker wishes to posit. We apply our methodology to CCS deployment in France and compare our results to the conservative case where subsidies are distributed without considering the network. Our case study shows that our methodology leads to a more favorable subsidy distribution to upstream emitters and minimizes regret differences between them.