Optimal timing of carbon capture and storage policies — A social planner’s view

Abstract

Carbon capture and storage (CCS) has a critical role to play in the world’s quest for net zero, by mitigating greenhouse gas (GHG) emissions from major pollution sources. However, the deployment of CCS technologies involves significant costs. This paper studies the social costs of CCS initiatives and GHG damage, adopting the perspective of a central planner to determine the optimal deployment strategy for various stakeholders. The study yields two principal findings. First, due to the diverse cost structures among stakeholders, it is not socially optimal for all to initiate CCS projects simultaneously. Instead, the player with the cost advantage should be the one to initiate a CCS project first. Second, under certain circumstances it may be socially advantageous for the player facing higher costs to refrain from engaging in CCS altogether. We derive the conditions conducive to both scenarios. The latter finding provides a clear guideline for policymakers: reduce the expenses of the high-cost player to foster global GHG emission reductions, contingent upon the objectives of the supranational institution.