Evaluating Carbon Capture and Storage in a Climate Model With Endogenous Technical Change

Abstract

We assess the extent to which Carbon Capture and Storage (CCS) and R&D on this abatement technology are part of a socially efficient solution to the problem of climate change. For this purpose, we extend the intertemporal model of climate and directed technical change developed by Acemoglu et al. (2012) [The environment and directed technical change. American Economic Review, 102(1), 131–166] to include a sector responsible for CCS. We show that two types of solutions exist: a renewable energy regime where current CCS technology is only temporarily used but never further developed; and a fossil energy regime where CCS is part of a long-term solution and is further developed at about the same rate as fossil energy technology. Our computations show that for current estimates of the marginal cost of CCS, the renewable energy regime clearly dominates the fossil fuel energy regime.

Environmental Policy and the Direction of Technical Change

“…() discuss parameter choices related to the climate part of the model; Mattauch et al . () add learning‐by‐doing effects to the framework; Durmaz and Schroyen () extend the model by adding abatement technology (carbon capture and storage); and Hémous () and van den Bijgaart () extend the model to include more than one country and analyse unilateral environmental policies in a global context. Importantly, none of these papers explores profits from innovations that are retained until replaced by a better innovation, meaning that future emission policies affect innovation decisions today.…”

Proposed solutions to anthropogenic climate change: A systematic literature review and a new way forward

“…Other renewable energy solutions include cogeneration (i.e. capture of waste heat), rooftop solar systems and solar farms, capturing landfill methane [ 31 , 41 , 60 , 61 ], capturing farm methane [ 45 ], ‘clean’ coal [ 62 ], carbon capture and storage (CCS) technology [ 44 , 45 , 63 ], hydrogen fusion technology, natural refrigerants [ 64 ], and nuclear energy [ 44 , 45 , [65] , [66] , [67] ].…”

Green Transitions and the Prevention of Environmental Disasters: Market-Based vs. Command-and-Control Policies

“…These works have inspired a good deal of recent contributions on environmental policy impact in presence of directed technical change. For instance, Mattauch et al (2015) add learning by doing effects and explore the role of substitution effects between clean and dirty inputs, showing that the policy proposed in Acemoglu et al (2012) might be excessively limited in scope; Durmaz and Schroyen (2016) include the effects of an abatement (carbon capture and storage) technology; Greaker et al (2018) introduce decreasing returns to R&D and allow future carbon taxes influencing current R&D decisions. Even more recently, Kruse-Andersen (2017) develops a variant of the model accounting for population growth effects, while Bezin (2017) enriches it to study the effects of cultural transmission mechanisms.…”