Carbon leakage from geological storage sites: Implications for carbon trading
Jorge H. García and
Energy Policy, 2019, vol. 127, issue C, 320-329
A number of studies show that large-scale deployment of Carbon Capture and Storage (CCS) is necessary to limit the increase in global average temperature to less than 2 °C by 2100. However, some experts and citizens worry about the integrity of carbon dioxide storage sites due to the possibility of future leakage. We introduce a two-period model where two emission mitigation technologies are available to society in the first period: CCS, with a risk of carbon dioxide leakage in the second period, and a riskless mitigation alternative, such as renewable energy. We first solve the model assuming that society does not know what the future rate of leakage will be. We then solve the model assuming that society will eventually learn the actual leakage rate. We find that, in a trading market in period one, reductions of CO2 emissions through CCS should generate a less than proportional amount of CO2 allowances. Estimates from simulations, using a coarse range of parameters, indicate that the discount factor of CCS allowances lies in the range (0.72, 1). Site-specific data is required to determine site-specific risks of leakage and discount factors.
Keywords: Carbon Capture and Storage; Carbon Leakage; Carbon Trading; Uncertainty; Learning (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:127:y:2019:i:c:p:320-329
Access Statistics for this article
Energy Policy is currently edited by N. France
More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().