THE CARBON CONTRACT FOR DIFFERENCES, A SUITABLE TOOL FOR THE DECARBONATION OF HYDROGEN?

Le contrat carbone pour différences, un outil adapté pour la décarbonation de l’hydrogène ?

Corinne Chaton and Coline Metta-Versmessen
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Corinne Chaton: EDF R&D SEQUOIA - EDF R&D - EDF R&D - EDF - EDF, FiME Lab - Laboratoire de Finance des Marchés d'Energie - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CREST - EDF R&D - EDF R&D - EDF - EDF
Coline Metta-Versmessen: Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: The EU-ETS carbon market is not sufficient to rapidly decarbonize sectors where low-carbon technologies are too expensive compared to existing technologies. To address this, our study characterizes a carbon contract for differences (CCfD). This is an instrument that guarantees producers using low-carbon technology a sufficient carbon price to ensure the competitivity of their technology compared to emitting ones. We propose a methodology for policymakers to design CCfD according to their region and sectoral application. We focus on a CCfD for the development of hydrogen by electrolysis as an alternative to steam methane reforming. Due to the dual impact of carbon pricing, we argue that this CCfD is a complex contract and should be defined for areas with a homogeneous electricity mix.

Keywords: energy transition; energy cost; CCfD; low-carbon hydrogen; EU-ET (search for similar items in EconPapers)
Date: 2023-05
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Published in Revue Economique, 2023, 74 (5), pp.705-737. ⟨10.3917/reco.745.0705⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04550831

DOI: 10.3917/reco.745.0705

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