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Enhancing Carbon Capture and Storage Deployment in the EU: A Sectoral Analysis of a Ton-Based Incentive Strategy

Author

Listed:
  • Filip Vodopić

    (Faculty of Mining, Geology and Petroleum Engineering, University of Zagreb, Pierottijeva 6, 10000 Zagreb, Croatia)

  • Domagoj Vulin

    (Faculty of Mining, Geology and Petroleum Engineering, University of Zagreb, Pierottijeva 6, 10000 Zagreb, Croatia)

  • Daria Karasalihović Sedlar

    (Faculty of Mining, Geology and Petroleum Engineering, University of Zagreb, Pierottijeva 6, 10000 Zagreb, Croatia)

  • Lucija Jukić

    (Faculty of Mining, Geology and Petroleum Engineering, University of Zagreb, Pierottijeva 6, 10000 Zagreb, Croatia)

Abstract

The EU considers carbon capture and storage (CCS) technology as an option for achieving climate goals, but its cost remains appreciable. Therefore, the purpose of this research was to investigate the implementation of a ton-based incentive system for CCS in the EU using Croatia as an example based on an analysis of the existing legislative framework in the EU and relevant tax credit provisions in the USA. A novel methodology for the design of the incentive system is presented in the form of partial allocation of the state’s auction revenues from the EU emissions trading system (ETS) into the CCS fund for five years. The CCS fund assets then incentivize the capture site for 10 years. The incentives are determined for each emitter in cement, electricity, paper and pulp, glass, oil refining, and petrochemical sectors based on varying European Union allowance (EUA) prices, CCS fund sizes, and CO 2 emission scenarios. In addition to designing the methodology, a novel method for forecasting CO 2 emissions is applied using geometric Brownian motion. The calculated incentives are categorized as underperforming, optimal, or overperforming, with upper and lower limits set to 80 and 10 EUR/t. The results are optimistic, since all sectors can be efficiently incentivized within the defined boundaries, meaning that the incentive system can be applied to all member states. The contracting of the incentives is proposed through carbon contracts for difference to avoid irregularities. Also, regulatory amendments are proposed so that emitters with emissions higher than 100 kt would have to consider CCS. Finally, the contributions are presented by proving the feasibility of the incentive system together with demonstrating its applicability to all member states.

Suggested Citation

  • Filip Vodopić & Domagoj Vulin & Daria Karasalihović Sedlar & Lucija Jukić, 2023. "Enhancing Carbon Capture and Storage Deployment in the EU: A Sectoral Analysis of a Ton-Based Incentive Strategy," Sustainability, MDPI, vol. 15(22), pages 1-34, November.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:22:p:15717-:d:1275926
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    References listed on IDEAS

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    1. Paltsev, Sergey & Morris, Jennifer & Kheshgi, Haroon & Herzog, Howard, 2021. "Hard-to-Abate Sectors: The role of industrial carbon capture and storage (CCS) in emission mitigation," Applied Energy, Elsevier, vol. 300(C).
    2. Mesut Doğan & Sutbayeva Raikhan & Nurbossynova Zhanar & Bodaukhan Gulbagda, 2023. "Analysis of Dynamic Connectedness Relationships among Clean Energy, Carbon Emission Allowance, and BIST Indexes," Sustainability, MDPI, vol. 15(7), pages 1-13, March.
    3. Sara Yasemi & Yasin Khalili & Ali Sanati & Mohammadreza Bagheri, 2023. "Carbon Capture and Storage: Application in the Oil and Gas Industry," Sustainability, MDPI, vol. 15(19), pages 1-32, October.
    4. Doğan, Mesut & Raikhan, Sutbayeva & Zhanar, Nurbossynova & Gulbagda, Bodaukhan, 2023. "Analysis of Dynamic Connectedness Relationships among Clean Energy, Carbon Emission Allowance, and BIST Indexes," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 15(7), pages 1-13.
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