Monopolistic sequestration of European carbon emissions

Niko Jaakkola

No 98, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: Mitigating climate change by carbon capture and storage (CCS) will require vast infrastructure investments. These investments include pipeline networks for transporting carbon dioxide (CO2) from industrial sites ('sources') to the storage sites ('sinks'). This paper considers the decentralised formation of trunk-line networks when geological storage space is exhaustible and demand is increasing. Monopolistic control of an exhaustible resource may lead to overinvestment and/or excessively early investment, as these allow the monopolist to increase her market power. The model is applied to CCS pipeline network formation in northwestern Europe. The features identi ed above are found to play a minor role. Should storage capacity be effectively inexhaustible, underinvestment dueto the inability of the monopolist to capture the entire social surplus is likely to have substantial welfare impacts. Multilateral bargaining to coordinate international CCS policies is particularly important if storage capacity is plentiful.

Keywords: carbon capture and storage; exhaustible resources; network formation; spatial networks (search for similar items in EconPapers)
JEL-codes: L50 Q31 Q58 (search for similar items in EconPapers)
Date: 2012-10-16
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:098

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