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Optimal Carbon Capture and Storage Policies

Author

Listed:
  • Ayong Le Kama, Alain
  • Fodha, Mouez
  • Lafforgue, Gilles
Abstract
Following the IPCC's report (2005), which recommended the development and the use of carbon capture and sequestration (CCS) technologies in order to achieve the environmental goals, defined by the Kyoto Protocol, the issue addressed in this paper concerns the optimal strategy regarding the long-term use of CCS technologies. The aim of this paper is to study the optimal carbon capture and sequestration policy. The CCS technologies has motivated a number of empirical studies, via complex integrated assessment models. This literature always considers that the existing technology allows sequestrating a fraction of the carbon emissions and concludes that the early introduction of sequestration can lead to a substantial decrease in the cost of environmental externality. But, the level of complexity of such operational models, aimed at defining some specific climate policies. We develop a very simple growth model so as to obtain analytical and tractable results and therefore exhibit the main driving forces that should determine the optimal CSS policy. We show within on the cost of extractions, CSS may be a long-term solution for the carbon emissions problem. Besides, it is also shown that the social planner will optimally choose to decrease the rate of capture and sequestration. Besides, we also introduce the decentralization of this simple economy, by considering the individual program of the fossil resource-holder and the one of the representative consumer. This helps us to compute analytically the optimal environmental policy, that is the also the optimal fossil fuel price profile.
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Suggested Citation

  • Ayong Le Kama, Alain & Fodha, Mouez & Lafforgue, Gilles, 2011. "Optimal Carbon Capture and Storage Policies," LERNA Working Papers 11.13.347, LERNA, University of Toulouse.
    • Handle: RePEc:ler:wpaper:24780
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    References listed on IDEAS

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    1. Alain Ayong Le Kama & Mouez Fodha, 2008. "Optimal nuclear waste burial policy under uncertainty," Documents de travail du Centre d'Economie de la Sorbonne v08092, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880, Elsevier.
    3. Alain Ayong Le Kama & Katheline Schubert, 2006. "Ressources renouvelables et incertitude sur les préférences des générations futures," Revue d'économie politique, Dalloz, vol. 116(2), pages 229-250.
    4. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2008. "Energy substitutions, climate change and carbon sinks," Ecological Economics, Elsevier, vol. 67(4), pages 589-597, November.
    5. Alain Ayong Le Kama & Mouez Fodha, 2010. "Optimal Nuclear Waste Burying Policy under Uncertainty," Post-Print hal-00639501, HAL.
    6. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
    7. Alain Le Kama & Katheline Schubert, 2004. "Growth, Environment and Uncertain Future Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 28(1), pages 31-53, May.
    8. Smulders, Sjak & Gradus, Raymond, 1996. "Pollution abatement and long-term growth," European Journal of Political Economy, Elsevier, vol. 12(3), pages 505-532, November.
    9. John Hartwick, 1977. "Intergenerational Equity and the Investment of Rents from Exhaustible Resources in a Two Sector Model," Working Paper 281, Economics Department, Queen's University.
    10. Alain Ayong Le Kama, 2001. "Preservation and exogenous uncertain future preferences," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 18(3), pages 745-752.
    11. André Grimaud & Luc Rouge, 2009. "Séquestration du carbone et politique climatique optimale," Économie et Prévision, Programme National Persée, vol. 190(4), pages 53-69.
    12. Reyer Gerlagh, 2006. "ITC in a Global Growth-Climate Model with CCS: The Value of Induced Technical Change for Climate Stabilization," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 223-240.
    13. Ragot, Lionel & Schubert, Katheline, 2008. "The optimal carbon sequestration in agricultural soils: Do the dynamics of the physical process matter?," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3847-3865, December.
    14. Edenhofer, Ottmar & Bauer, Nico & Kriegler, Elmar, 2005. "The impact of technological change on climate protection and welfare: Insights from the model MIND," Ecological Economics, Elsevier, vol. 54(2-3), pages 277-292, August.
    15. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-974, December.
    16. Frederick Ploeg & Cees Withagen, 1991. "Pollution control and the Ramsey problem," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(2), pages 215-236, June.
    17. Kurosawa, Atsushi, 2004. "Carbon concentration target and technological choice," Energy Economics, Elsevier, vol. 26(4), pages 675-684, July.
    18. Vincent Gitz & Philippe Ambrosi & Bertrand Magne & Philippe Ciais, 2009. "Is There an Optimal Timing for Sequestration to Stabilize Future Climate?," Post-Print hal-00784004, HAL.
    19. Grimaud, André & Lafforgue, Gilles & Magné, Bertrand, 2011. "Climate change mitigation options and directed technical change: A decentralized equilibrium analysis," Resource and Energy Economics, Elsevier, vol. 33(4), pages 938-962.
    20. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2006. "Optimal Sequestration Policy with a Ceiling on the Stock of Carbon in the Atmosphere," IDEI Working Papers 401, Institut d'Économie Industrielle (IDEI), Toulouse.
    21. Edmonds, Jae & Clarke, John & Dooley, James & Kim, Son H. & Smith, Steven J., 2004. "Stabilization of CO2 in a B2 world: insights on the roles of carbon capture and disposal, hydrogen, and transportation technologies," Energy Economics, Elsevier, vol. 26(4), pages 517-537, July.
    22. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 3-28.
    23. Geoffrey Heal (ed.), 1993. "The Economics of Exhaustible Resources," Books, Edward Elgar Publishing, number 554.
    24. Roger Guesnerie & Henry Tulkens, 2009. "The Design of Climate Policy," Post-Print halshs-00754871, HAL.
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    Cited by:

    1. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2015. "The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(1), pages 55-80, January.
    2. Pierre-André Jouvet & Marie Renner, 2014. "Social Acceptance and Optimal Pollution: CCS or Tax?," Post-Print hal-01385960, HAL.
    3. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2012. "Optimal Timing of Carbon Capture Policies Under Alternative CCS Cost Functions," LERNA Working Papers 12.11.368, LERNA, University of Toulouse.
    4. repec:dau:papers:123456789/12981 is not listed on IDEAS
    5. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
    6. Grimaud, André & Rouge, Luc, 2014. "Carbon sequestration, economic policies and growth," Resource and Energy Economics, Elsevier, vol. 36(2), pages 307-331.
    7. Grimaud, André & Rougé, Luc, 2012. "Carbon Sequestration, Economic Policies and Growth," LERNA Working Papers 12.22.379, LERNA, University of Toulouse.
    8. Cai, W. & Singham, D.I., 2018. "A principal–agent problem with heterogeneous demand distributions for a carbon capture and storage system," European Journal of Operational Research, Elsevier, vol. 264(1), pages 239-256.
    9. Moreaux, Michel & Withagen, Cees, 2015. "Optimal abatement of carbon emission flows," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 55-70.
    10. Jean-Pierre Amigues & Gilles Lafforgue & Michel Moreaux, 2014. "Optimal Timing of CCS Policies with Heterogeneous Energy Consumption Sectors," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(3), pages 345-366, March.
    11. Durmaz, Tunç & Schroyen, Fred, 2013. "Evaluating Carbon Capture and Storage in a Climate Model with Directed Technical Change," Discussion Paper Series in Economics 14/2013, Norwegian School of Economics, Department of Economics.
    12. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.
    13. Michael Hoel, 2013. "Supply Side Climate Policy and the Green Paradox," CESifo Working Paper Series 4094, CESifo.
    14. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2014. "Optimal Timing of Carbon Capture and Storage Policies Under Learning-by-doing," IDEI Working Papers 824, Institut d'Économie Industrielle (IDEI), Toulouse, revised May 2014.
    15. Amigues, Jean-Pierre & Lafforgue, Gilles & Moreaux, Michel, 2014. "Optimal Timing of CCS Policies under Decreasing Returns to Scale," TSE Working Papers 14-529, Toulouse School of Economics (TSE).
    16. Kollenbach, Gilbert, 2015. "Abatement, R&D and growth with a pollution ceiling," Journal of Economic Dynamics and Control, Elsevier, vol. 54(C), pages 1-16.

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