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A Least-Cost optimisation Model of Co2 Capture Applied to Major uK Power Plants Within The Eu-ETS Framework

Abstract:
Concerns about the cost of CO2 capture and sequestration, and the effective�ness of carbon abatement policies loom large in discussions on climate change mitiga�tion. Several writers address the issue from various perspectives. This paper attempts to add relative realism to discussions on CO2 capture costs, and, the deployment of carbon capture technology in the UK by using publicly available company data on the long term capacity expansion and CO2 capture investment programmes of selected power plants in the UK. With an estimated �8 billion plan to install a generation ca�pacity of 11 GW and capture capability of 44 MtCO2/year, it is imperative to optimise this huge potential investment. A least-cost optimisation model was formulated and solved with the LP algorithm available in GAMS. The model was then applied to ad�dress a number of issues, including the choice of an optimal carbon abatement policy within the EU-ETS framework. The major findings of the study include (a) the long term total cost curve of CO2 capture has three phases � rising, plateau, rising; (b) alternative capture technologies do not have permanent relative cost advantages or disadvantages; (c) Government incentives encourage carbon capture and the avoid�ance of emission penalty charges; and (d) the goals of EU-ETS are more effectively realised with deeper cuts in the EUA ratios than merely hiking the emission penalty, as proposed in EU-ETS Phase II.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Electricity – Policy and Regulation; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Q54 - Climate; Natural Disasters and Their Management; Global Warming

Keywords: Least cost optimisation model, CO2 capture, UK, Electricity production, EU-ETS, Carbon capture technology

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI-7


Published in Volume 29, Special Issue of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.