CO₂-to-Fuel – Business and Institutional Aspects of Implementation Dynamics

Abstract

Valorization of CO2 captured from industrial processes is an important task for reaching climate and energy targets. The presented study addresses the use of CO2 for the production of ethanol, which can be used as a transport fuel. Hydrogen, produced by renewable energy technologies, is combined with CO2 to produce the synthetic fuel, thus making this approach attractive from a climate perspective. Aim of the study was to simulate the dynamics of the development of CO2-to-fuel solution, taking Latvia as the case. System dynamics modelling was used as the method for analysis. The model reflects several important feedbacks, such as relation between the captured CO2 emissions and the share of avoided CO2 emissions in transport due to fuel substitution, as well as investment in new production capacity of the ethanol. Use of avoided CO2 emission costs for funding of research and development (R&D) of the technology and direct subsidies for ethanol production is the analysed institutional aspect. The results show that if 15 % of the industrial CO2 emissions are used for ethanol production then circa 12 % of the transport CO2 emissions can be avoided. The share of avoided transport CO2 emissions are the most sensitive to unit costs of hydrogen production.