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Monopolistic Sequestration of European Carbon Emissions

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  • Niko Jaakkola

Abstract

Mitigating climate change by carbon capture and storage (CCS) will require vast infrastructure investments. These investments include pipeline networks for transporting carbon dioxide (CO2) from industrial sites ('sources') to the storage sites ('sinks'). This paper considers the decentralised formation of trunk-line networks when geological storage space is exhaustible and demand is increasing. Monopolistic control of an exhaustible resource may lead to overinvestment and/or excessively early investment, as these allow the monopolist to increase her market power. The model is applied to CCS pipeline network formation in northwestern Europe. The features identified above are found to play a minor role. Should storage capacity be effectively inexhaustible, underinvestment due to the inability of the monopolist to capture the entire social surplus is likely to have substantial welfare impacts. Multilateral bargaining to coordinate international CCS policies is particularly important if storage capacity is plentiful.

Suggested Citation

  • Niko Jaakkola, 2013. "Monopolistic Sequestration of European Carbon Emissions," OxCarre Working Papers 098, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  • Handle: RePEc:oxf:oxcrwp:098
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    File URL: http://www.oxcarre.ox.ac.uk/files/OxCarreRP201298.pdf
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    Cited by:

    1. Moreaux, Michel & Withagen, Cees, 2013. "Climate Change and Carbon Capture and Storage," IDEI Working Papers 774, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Moreaux, Michel & Withagen, Cees, 2015. "Optimal abatement of carbon emission flows," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 55-70.

    More about this item

    Keywords

    carbon capture and storage; exhaustible resources; network formation; spatial networks;

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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