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Title:The role of carbon capture and sequestration policies for climate change mitigation PDF Logo
Authors:Kalkuhl, Matthias
Edenhofer, Ottmar
Lessmann, Kai
Issue Date:2012
Series/Report no.:CESifo working paper: Energy and Climate Economics 3834
Abstract:This paper takes the policy failure in establishing a global carbon price for efficient emissions reduction as a starting point and analyzes to what extent technology policies can be a reasonable second-best approach. From a supply-side perspective, carbon capture and storage (CCS) policies differ substantially from renewable energy policies: they increase fossil resource demand and simultaneously lower emissions. We show in a theoretical model that, under idealized conditions, a pure CCS subsidy can be as efficient as a carbon tax. Within a numerical dynamic general equilibrium model, we analyze CCS and renewable energy policies under more realistic parameter settings for imperfect or missing carbon prices. We find that in contrast to renewable energy policies, CCS policies are not always capable of reducing emissions in the long run. If feasible, CCS policies carry often lower social costs compared to renewable energy policies. In case fossil resources are abundant and renewable energy costs low, renewable energy policies perform better. Our results indicate that a pure CCS policy or a pure renewable energy policy carry specific risks of missing the environmental target. A smart combination of both, however, can be a robust and low-cost temporary second-best policy.
Subjects:renewable energy subsidy
supply-side dynamics
green paradox
carbon pricing
global warming
CCS
JEL:Q31
Q38
Q40
Q54
Q58
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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