Network effects and excess inertia: Do Carbon Capture and Storage Technologies Suffer from Technology Lock-In?

Abstract:

CCS is cited as a critical technology for mitigating climate change. Deployment of CCS has, in contrast, been painfully slow. This thesis analyzes the existence of lock-in in the market for CCS. The model features a one stage game between power plant producers and producers of CO2 transport and storage services. The power plant producers choose whether to invest in a power plant with carbon capture technology (CCS), or to invest in a power plant which emits CO2 directly into the atmosphere. The model is then simulated using realistic estimates on the CCS supply chain. The analysis finds that the CCS market suffers from excess inertia in some of the analyzed scenarios.  The carbon tax expectations of producers and the add-on costs of CCS seem to be of particular importance of whether the market generates excess inertia.

Published June 30, 2017 11:36 AM - Last modified July 1, 2017 9:50 AM