Kickstarting CCS Adoption: Tailoring Subsidies to Emitters' Needs

Adrien Nicolle (), David Lowing () and Diego Cebreros ()
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Adrien Nicolle: LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay, CEC - Chaire Economie du Climat - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres
David Lowing: CentraleSupélec, LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay
Diego Cebreros: LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay

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Abstract: Despite being an essential technology in industrial decarbonization scenarios, Carbon Capture and Storage (CCS) struggles to achieve large-scale deployment. Indeed, emitters face a coordination problem, which prevents them from forming the critical mass the transportation operator needs to develop a network that leverages economies of scale. In response, many public entities have multiplied financing mechanisms to support CCS adoption. However, current subsidy mechanisms overlook the network infrastructure and do not acknowledge the heterogeneity of emitters. This paper introduces a methodology for distributing subsidies among industrial emitters based on their capture costs and network cost contribution while accounting for potential budgetary constraints. Firstly, we evaluate each emitter's contribution to the network cost through the Shapley value. Secondly, we define each emitter's subsidy claim by combining results from the first step with their capture cost. We then distribute the subsidies according to the Proportional bankruptcy solution (i.e., proportionally to each emitter's claim). We justify this solution based on properties (axioms) we desire our subsidy distribution to verify. A key feature of our methodology is its flexibility. Indeed, each step can be adapted to suit the normative framework that a future study or policymaker wishes to posit. We apply our methodology to CCS deployment in France and compare our results to the conservative case where subsidies are distributed without considering the network. Our case study shows that our methodology leads to a more favorable subsidy distribution to upstream emitters (i.e., whose emissions pass through many pipelines), which are the most influential in CCS adoption.

Keywords: Carbon capture and storage; Cooperative games; Bankruptcy; Subsidy (search for similar items in EconPapers)
Date: 2024-06-30
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