Joining the CCS Club ! Insights from a Northwest European CO2 pipeline project

Olivier Massol (1, 2, 3) , Stéphane Tchung-Ming (1, 4)

1 IFPEN - IFP Energies nouvelles
2 IFP School
3 City University London
4 CREDEN - Centre de Recherche en Economie et Droit de l'ENergie

The large-scale diffusion of Carbon Capture and Storage (CCS) imposes the construction of a sizeable CO2 pipeline infrastructure. This paper analyzes the conditions for a widespread adoption of CCS by a group of emitters that can be connected to a common pipeline system. It details a quantitative framework capable of assessing how the tariff structure and the regulatory constraints imposed on the pipeline operator impact the overall cost of CO2 abatement via CCS. This modeling framework is applied to the case of a real European CO2 pipeline project. We find that the obligation to use cross-subsidyfree pipeline tariffs has a minor impact on the minimum CO2 price required to adopt the CCS. In contrast, the obligation to charge non-discriminatory prices can either impede the adoption of CCS or significantly raises that price. Besides, we compared two alternative regulatory frameworks for CCS pipelines: a common European organization as opposed to a collection of national regulations. The results indicate that the institutional scope of that regulation has a limited impact on the adoption of CCS compared to the detailed design of the tariff structure imposed to pipeline operators.

Keywords: OR in Environment and Climate Change; Carbon Capture and Storage; CO2 pipeline; Club theory; Regulation; Cross-subsidy-free tariffs

Domains: Economics and Finance

Olivier Massol, Stéphane Tchung-Ming. Joining the CCS Club ! Insights from a Northwest European CO2 pipeline project: Cahiers de l'Economie, Série Recherche, n° 89. 2012. ⟨hal-03206457⟩