Abstract:
Power generation firms confront impending replacement of an aging coal-fired fleet in a business environment characterized by volatile natural gas prices and uncertain carbon regulation. We develop a stochastic dynamic programming model of firm investment decisions that minimizes the expected present value of future power generation costs under uncertain natural gas and carbon prices. We explore the implications of regulatory uncertainty on generation technology choice and the optimal timing of investment, and assess the implications of these choices for regulators. We find that interaction of regulatory uncertainty with irreversible investment always raises the social cost of carbon abatement. Further, the social cost of regulatory uncertainty is strongly dependent on the relative competitiveness of IGCC plants, for which the cost of later carbon capture retrofits is comparatively small, and on the firm�s ability to use investments in natural gas generation as a transitional strategy to manage carbon regulation uncertainty. Without highly competitive IGCC or low gas prices, regulatory uncertainty can increase the expected social cost of reducing emissions by 40 to 60%.

Abstract:
In order to limit global mean temperature increase to less than 2�C, long-term greenhouse gas concentrations must remain low. This paper discusses how such low concentrations can be reached, based on results from the IMAGE modelling framework (including TIMER and FAIR). We show that the attainability of low greenhouse gas concentration targets, in particular 450 and 400 ppm CO2 equivalent critically depends on model assumptions, such as bio-energy potentials. Under standard model assumptions, these targets can be reached, although the lowest requires the use of bio-energy in combination with carbon-capture-and-storage. Regions are affected differently by ambitious climate policies in terms of energy and land use, although stringent emission reductions will be required in all regions. Resulting co-benefits of climate policy (such as energy security and air pollution) are also different across world regions.

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

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.