How Co2 Capture and Storage can Mitigate Carbon Leakage

23 Pages Posted: 17 Feb 2011 Last revised: 17 Feb 2014

See all articles by Philippe Quirion

Philippe Quirion

CIRED, International Research Center on Environment & Development, France; CNRS/EHESS

Julie Rozenberg

CIRED, International Research Center on Environment & Development, France

Olivier Sassi

Centre international de recherche sur l’environnement et le développement

Adrien Vogt-Schilb

CIRED, Centre international de recherche sur l’environnement et le développement

Date Written: February 17, 2011

Abstract

Most CO2 abatement policies reduce the demand for fossil fuels and therefore their price in international markets. If these policies are not global, this price decrease raises emissions in countries without CO2 abatement policies, generating “carbon leakage”. On the other hand, if the countries which abate CO2 emissions are net fossil fuel importers, they benefit from this price decrease, which reduces the abatement cost. In contrast, CO2 capture and storage (CCS) does not reduce fossil fuel demand, therefore it generates neither this type of leakage nor this negative feedback on abatement costs. We quantify these effects with the global hybrid general equilibrium model Imaclim-R and show that they are quantitatively important. Indeed, for a given unilateral abatement in OECD countries, leakage is more than halved in a scenario with CCS included among the abatement options, compared to a scenario prohibiting CCS. We show that the main reason for this difference in leakage is the above-mentioned international fossil fuel price feedback. This article does not intend to assess the desirability of CCS, which has many other pros and cons. It just identifies a consequence of CCS that should be taken into account, together with many others, when deciding to what extent CCS should be developed.

Keywords: CO2 Capture and Storage, Carbon Leakage

JEL Classification: Q5, Q58

Suggested Citation

Quirion, Philippe and Rozenberg, Julie and Sassi, Olivier and Vogt-Schilb, Adrien, How Co2 Capture and Storage can Mitigate Carbon Leakage (February 17, 2011). FEEM Working Paper No. 15.2011. Available at SSRN: https://ssrn.com/abstract=1763165 or http://dx.doi.org/10.2139/ssrn.1763165

Philippe Quirion (Contact Author)

CIRED, International Research Center on Environment & Development, France ( email )

Campus du Jardin Tropical
45 bis avenue de la Belle Gabrielle
F94736 Nogent sur Marne Cedex
France
+33 1 43 94 73 95 (Phone)
+33 1 43 94 73 70 (Fax)

CNRS/EHESS

54, boulevard Raspail
Paris, 75006
France

Julie Rozenberg

CIRED, International Research Center on Environment & Development, France ( email )

Campus du Jardin Tropical
45 bis avenue de la Belle Gabrielle
F94736 Nogent sur Marne Cedex
France

Olivier Sassi

Centre international de recherche sur l’environnement et le développement ( email )

France

Adrien Vogt-Schilb

CIRED, Centre international de recherche sur l’environnement et le développement ( email )

France

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