[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ecl/stabus/2033r.html
   My bibliography  Save this paper

Carbon Capture by Fossil Fuel Power Plants: An Economic Analysis

Author

Listed:
  • Islegen, Ozge

    (Stanford University)

  • Reichelstein, Stefan

    (Stanford University)

Abstract
For fossil fuel power plants to be built in the future, carbon capture and storage (CCS) technologies offer the potential for significant reductions in CO2 emissions. We examine the break-even value for CCS adoptions, that is, the critical value in the charge for CO2 emissions that would justify investment in CCS capabilities. Our analysis takes explicitly into account that the supply of electricity at the wholesale level (generation) is organized competitively in some U.S. jurisdictions, while in others a regulated utility provides integrated generation and distribution services. For either market structure, we find that emissions charges in the range of $25-$30 per tonne of CO2 would be the break-even value for adopting CCS capabilities at new coal-fired power plants. The corresponding break-even values for natural gas plants are substantially higher, near $60 per tonne. Our break-even estimates serve as a basis for projecting the change in electricity prices once carbon emissions become costly. CCS capabilities effectively put an upper bound on the rise in electricity prices. We estimate this bound to be near 30% at the retail level for both coal and natural gas plants. In contrast to the competitive power supply scenario, however, these price increases materialize only gradually for a regulated utility. The delay in price adjustments reflects that for regulated firms the basis for setting product prices is historical cost, rather than current cost.

Suggested Citation

  • Islegen, Ozge & Reichelstein, Stefan, 2009. "Carbon Capture by Fossil Fuel Power Plants: An Economic Analysis," Research Papers 2033r, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:2033r
    as

    Download full text from publisher

    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP2033R.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, September.
    2. Islegen Ozge & Reichelstein Stefan J, 2009. "The Economics of Carbon Capture," The Economists' Voice, De Gruyter, vol. 6(12), pages 1-5, December.
    3. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giovanni, Emily & Richards, Kenneth R., 2010. "Determinants of the costs of carbon capture and sequestration for expanding electricity generation capacity," Energy Policy, Elsevier, vol. 38(10), pages 6026-6035, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. van den Bergh, J.C.J.M. & Botzen, W.J.W., 2015. "Monetary valuation of the social cost of CO2 emissions: A critical survey," Ecological Economics, Elsevier, vol. 114(C), pages 33-46.
    2. Strand, Jon, 2011. "Carbon offsets with endogenous environmental policy," Energy Economics, Elsevier, vol. 33(2), pages 371-378, March.
    3. Pycroft, Jonathan & Vergano, Lucia & Hope, Chris & Paci, Daniele & Ciscar, Juan Carlos, 2011. "A tale of tails: Uncertainty and the social cost of carbon dioxide," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 5, pages 1-29.
    4. Bommier, Antoine & Lanz, Bruno & Zuber, Stéphane, 2015. "Models-as-usual for unusual risks? On the value of catastrophic climate change," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 1-22.
    5. Steve Newbold & Charles Griffiths & Christopher C. Moore & Ann Wolverton & Elizabeth Kopits, 2010. "The "Social Cost of Carbon" Made Simple," NCEE Working Paper Series 201007, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Aug 2010.
    6. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    7. Sam Fankhauser & Cameron Hepburn, 2009. "Carbon markets in space and time," GRI Working Papers 3, Grantham Research Institute on Climate Change and the Environment.
    8. Stefano Bartolini & Francesco Sarracino, 2021. "Happier and Sustainable. Possibilities for a post-growth society," Department of Economics University of Siena 855, Department of Economics, University of Siena.
    9. Luca Gerotto & Paolo Pellizzari, 2021. "A replication of Pindyck’s willingness to pay: on the efforts required to obtain results," SN Business & Economics, Springer, vol. 1(5), pages 1-25, May.
    10. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    11. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 29-70, February.
    12. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    13. Aichele, Rahel & Felbermayr, Gabriel, 2012. "Kyoto and the carbon footprint of nations," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 336-354.
    14. Stefano Giglio & Bryan Kelly & Johannes Stroebel, 2021. "Climate Finance," Annual Review of Financial Economics, Annual Reviews, vol. 13(1), pages 15-36, November.
    15. Christoph Hambel & Holger Kraft & Eduardo Schwartz, 2015. "Optimal Carbon Abatement in a Stochastic Equilibrium Model with Climate Change," NBER Working Papers 21044, National Bureau of Economic Research, Inc.
    16. Pindyck, Robert S., 2012. "Uncertain outcomes and climate change policy," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 289-303.
    17. Dietz, Simon, 2012. "The treatment of risk and uncertainty in the US social cost of carbon for regulatory impact analysis," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-12.
    18. Ikefuji, M. & Magnus, J.R. & Sakamoto, H., 2010. "Climate Change, Economic Growth, and Health," Discussion Paper 2010-86, Tilburg University, Center for Economic Research.
    19. Yohe, Gary W. & Tol, Richard S. J. & Anthoff, David, 2009. "Discounting for Climate Change," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-22.
    20. Gernot Wagner & Richard Zeckhauser, 2012. "Climate policy: hard problem, soft thinking," Climatic Change, Springer, vol. 110(3), pages 507-521, February.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:stabus:2033r. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/gsstaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.