Carbon capture and renewable energy policies: Could policy harmonization be a puzzle piece to solve the electricity crisis?

The electricity market crisis, driven by factors such as increased energy demand, rising fuel prices, aging infrastructure, and greenhouse gas emissions, requires a multifaceted approach including the strategic implementation of Carbon Capture and Storage (CCS) technologies, which despite high costs and potential adverse impact on renewable investments, can allow the use of fossil fuels to maintain grid stability, and simultaneously lower carbon footprint. Across the world, several nations are designing financial incentives and improving regulatory frameworks to reduce barriers to the deployment of CCS. However, it is not clearly understood whether and to what extent such policy support would affect the incentive to invest in renewable energy technologies. Moreover, it is unclear whether existing renewable subsidies would complement or counteract power generators’ prospective investments in carbon capture retrofits in the presence of CCS subsidies. This study examines the rate of change in renewable energy generation with changes in CCS subsidies as well as the rate of change in the percent of carbon captured for storage with a change in renewable energy production subsidies (cross-impact of policies). The results, under the given model framework and assumptions, indicate that (1) renewable subsidies could lower the incentive to capture a larger share of carbon dioxide emissions for permanent storage, and (2) CCS subsidies could reduce the incentive to produce more renewable energy. These results highlight the need for policy makers to consider the potential trade-offs signaled by CCS policy support.