Gotta Catch ’Em All: CCUS with endogenous technical change

21 Pages Posted: 29 Nov 2023

See all articles by Davide Bazzana

Davide Bazzana

University of Brescia - Department of Economics and Management; Fondazione Eni Enrico Mattei (FEEM)

Nicola Comincioli

University of Brescia

Camilla Gusperti

Fondazione Eni Enrico Mattei (FEEM)

Demis Legrenzi

University of Brescia - Department of Economics and Management

Massimiliano Rizzati

Fondazione Eni Enrico Mattei

Sergio Vergalli

University of Brescia - Department of Economics; Fondazione Eni Enrico Mattei (FEEM), Milan

Date Written: November 28, 2023

Abstract

Carbon Capture Utilization and Storage (CCUS) stands as a pivotal technology crucial for achieving the most ambitious climate objectives. Despite its prominent inclusion in energy mix projections, its current deployment falls short of the requisite level. Additionally, uncertainties surrounding future developments pose potential obstacles to its optimal diffusion. This study addresses two primary shortcomings that could impede the widespread adoption of CCUS. Firstly, it investigates how investments in CCUS technologies either compete with or complement other green research and development (R&D) activities. Secondly, it explores how the heterogeneity among different economies and the factors influencing the technology might lead to alternative configurations compared to the current trajectory. To address these issues, this study introduces CCUS into a regional Integrated Assessment Model (IAM) incorporating endogenous green R&D and heterogeneous cost functions. The model generates optimal pathways for both CCUS and green R&D, revealing a significant challenge: an insufficient valuation of R&D costs could potentially displace all investment in CCUS. Furthermore, the distribution of CCUS capital across regions by the end of the century necessitates substantial investments from regions with currently lower values, such as Europe and lower-income countries. This research underscores the imperative need for policies that mitigate uncertainties surrounding future technologies and coordinate contemporary state investments. Such policies are essential for CCUS to attain the envisaged contributions to emission reduction targets.

Keywords: Carbon Capture Utilization and Storage (CCUS), Integrated Assessment Model (IAM), Green Research and Development (R&D), Climate Objectives, Technological Uncertainties, Regional Disparities, Emission Reduction Targets

JEL Classification: Q53, Q54, O32

Suggested Citation

Bazzana, Davide and Comincioli, Nicola and Gusperti, Camilla and Legrenzi, Demis and Rizzati, Massimiliano and Vergalli, Sergio, Gotta Catch ’Em All: CCUS with endogenous technical change (November 28, 2023). FEEM Working Paper No. 25, Available at SSRN: https://ssrn.com/abstract=4647837 or http://dx.doi.org/10.2139/ssrn.4647837

Davide Bazzana

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

Nicola Comincioli

University of Brescia ( email )

Piazza del Mercato, 15
25122 Brescia
Italy

Camilla Gusperti (Contact Author)

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

Demis Legrenzi

University of Brescia - Department of Economics and Management ( email )

Contrada Santa Chiara, 50
BRESCIA, BS 25122
Italy

Massimiliano Rizzati

Fondazione Eni Enrico Mattei ( email )

Italy

Sergio Vergalli

University of Brescia - Department of Economics ( email )

Via San Faustino 74B
Brescia, 25122
Italy

Fondazione Eni Enrico Mattei (FEEM), Milan ( email )

Corso Magenta 63
20123 Milan
Italy

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