Price: $25 Add to Cart
Willingness to Pay for a Climate Backstop: Liquid Fuel Producers and Direct CO2 Air Capture
Author(s): Gregory F. Nemet, Adam R. Brandt
The Quarterly Journal of the IAEE's Energy Economics Education Foundation
Volume 33, Number 1
Abstract: We conduct a sensitivity analysis to describe conditions under which liquid fuel producers would fund the development of a climate backstop. We estimate (1) the cost to develop competitively priced direct CO2 air capture technology, a possible climate backstop and (2) the effect of this technology on the value of liquid fuel reserves by country and fuel. Under most assumptions, development costs exceed individual benefits. A particularly robust result is that carbon prices generate large benefits for conventional oil producers--making a climate backstop unappealing for them. Unilateral investment does become more likely under: stringent carbon policy, social discount rates, improved technical outcomes, and high price elasticity of demand for liquid fuels. Early stage investment is inexpensive and could provide a hedge against such developments, particularly for fuels on the margin, such as tar sands and gas-to-liquids. Since only a few entities benefit, free riding is not an important disincentive to investment, although uncertainty about who benefits probably is.
Keywords: Air capture, Backstop technology, Climate policy, Learning by doing, R&D, Unconventional oil
Energy Specializations: Energy Modeling – Sectoral Energy Demand & Technology, Energy and the Environment – Climate Change and Greenhouse Gases, Energy and the Environment – R&D and Emerging Technologies, Energy and the Environment – Policy and Regulation,
Keywords: Air capture, Backstop technology, Climate policy, Learning by doing, R&D, Unconventional oil,
Reference information is available for this article. Join IAEE or purchase the article to view reference data.
View Issue Table of Contents