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Carbon Capture and Storage Technologies in the European Power Market

Rolf Golombek, Mads Greaker, Sverre A.C. Kittelsen, Ole Røgeberg, and Finn Roar Aune

Year: 2011
Volume: Volume 32
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol32-No3-8
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Abstract:
We examine the potential of Carbon Capture and Storage (CCS) technologies in the European electricity markets, assessing whether CCS technologies will reduce carbon emissions substantially in the absence of investment subsidies, and how the availability of CCS technologies may affect electricity prices and the amount of renewable electricity. To this end we augment a multi-market equilibrium model of the European energy markets with CCS electricity technologies. The CCS technologies are characterized by costs and technical efficiencies synthesized from a number of recent CCS reviews. Our simulations indicate that with realistic values for carbon prices, new CCS coal power plants become profitable, totally replacing non-CCS coal power investments and to a large extent replacing new wind power. New CCS gas power also becomes profitable, but does not replace non-CCS gas power investment fully. Substantially lower costs, through subsidies on technological development or deployment, would be necessary to make CCS modification of existing coal and gas power plants profitable for private investors. doi: 10.5547/ISSN0195-6574-EJ-Vol32-No3-8



Promoting CCS in Europe: A Case for Green Strategic Trade Policy?

Finn Roar Aune, Simen Gaure, Rolf Golombek, Mads Greaker, Sverre A.C. Kittelsen, and Lin Ma

Year: 2022
Volume: Volume 43
Number: Number 6
DOI: 10.5547/01956574.43.6.faun
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Abstract:
According to IEA (2018), there is a huge gap between the first-best social optimal utilization of Carbon Capture and Storage (CCS) technologies to lower global CO2 emissions and the current, negligible diffusion of this technology. This calls for a financial support mechanism for CCS. We study to what extent promotion of CCS in Europe should be through subsidizing development and production of CCS technologies—an upstream subsidy—or by subsidising the purchasers of CCS technologies—a downstream subsidy. This question is examined theoretically in a stylized model and numerically by using a new approach that integrates strategic trade policy with an economic model of the European energy markets. The theory model suggests that upstream subsidies should clearly be preferred, and this is confirmed by the numerical simulations. For the European power market, the numerical simulations suggest that subsidies to CCS coal power should exceed subsidies to CCS gas power.





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