Carbon Capture and Sequestration: How Much Does this Uncertain Option Affect Near-Term Policy Choices?

25 Pages Posted: 19 Jul 2005  

Valentina Bosetti

Fondazione Eni Enrico Mattei (FEEM); Bocconi University; CMCC - Euro Mediterranean Centre for Climate Change

Laurent Gilotte

CIRED, International Research Center on Environment & Development, France; University of Montreal - Centre de recherches mathématiques (CRM)

Date Written: June 2005

Abstract

One of the main issues in the climate policy agenda, the timing of abatement efforts, hinges on the uncertainties of climate change risks and technological evolution. We use a stochastic optimization framework and jointly explore these two features. First, we embed in the model future potential large-scale availability of Carbon Capture and Storage (CCS) technologies. While non-CCS mitigation that reduces fossil energy use is modelled as exerting inertia on the economic system, mainly due to the durability of the capital in energy systems and to technology lock-in and lock-out phenomena, the implementation of CCS technologies is modelled as implying less resilience of the system to changes in policy directions. Second, climate uncertainty is related in the model to the atmospheric temperature response to an increase in GHGs concentration. Performing different simulation experiments, we find that the environmental target, derived from a cost-benefit analysis, should be more ambitious when CCS is included in the picture. Moreover, the possible future availability of CCS is not a reason to significantly reduce near-term optimal abatement efforts. Finally, the availability of better information on the climate cycle is in general more valuable than better information on the CCS technological option.

Keywords: Climate change, Uncertainty, Sequestration, Cost-benefit analysis

JEL Classification: D62, D63, H23, Q29

Suggested Citation

Bosetti, Valentina and Gilotte, Laurent, Carbon Capture and Sequestration: How Much Does this Uncertain Option Affect Near-Term Policy Choices? (June 2005). FEEM Working Paper No. 86.05. Available at SSRN: https://ssrn.com/abstract=755424 or http://dx.doi.org/10.2139/ssrn.755424

Valentina Bosetti (Contact Author)

Fondazione Eni Enrico Mattei (FEEM) ( email )

C.so Magenta 63
Milano, 20123
Italy

Bocconi University ( email )

Via Gobbi 5
Milan, 20136
Italy

CMCC - Euro Mediterranean Centre for Climate Change

Viale Gallipoli, 49
Lecce, 73100
Italy

Laurent Gilotte

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

University of Montreal - Centre de recherches mathématiques (CRM)

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada

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