Evaluation of cooperative mitigation: captured carbon dioxide for enhanced oil recovery

Lei Zhu, Xing Yao and Xian Zhang ()
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Xing Yao: Chinese Academy of Sciences
Xian Zhang: The Administrative Center for China’s Agenda 21, Ministry of Science and Technology

Mitigation and Adaptation Strategies for Global Change, 2020, vol. 25, issue 7, No 5, 1285 pages

Abstract: Abstract Robust mitigation options will play significant role in achieving the target of limiting global change to below 1.5 °C above pre-industrial levels by 2100. To support cooperation for mitigation development, we establish a real options-based model to evaluate the rational decisions of exercising the abandon option for carbon capture and storage-enhanced oil recovery (CCS-EOR) projects under oil market and geological uncertainties. Three possible cooperative mechanisms (fixed carbon dioxide (CO2) price, oil-indexed CO2 price, and joint venture contracts) among CO2-EOR stakeholders are evaluated. The results show that the conflicts in profit maximization targets for different stakeholders in cooperative mitigation are to a great extent unable to be avoided. A joint venture business model is preferred in cooperative mitigation as it can effectively weaken such conflicts. And it is more reasonable to provide incentives to the downstream of the CO2-EOR chain than compensating the adoption cost of carbon capture technologies in the upstream. From a global perspective, the inefficient cooperation can be a main barrier that hinders the development of deep-cutting options. Global mitigation strategies should not only focus on promoting technology progress but also the design of innovative business models to balance the benefits among stakeholders. A joint venture business model is recommended in both the developed and developing countries for seizing the early mitigation opportunities.

Keywords: Real options; Monte Carlo simulation; Carbon capture and storage (CCS); Enhanced oil recovery (EOR); Cooperative mechanism of mitigation (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11027-019-09906-0

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