Carbon prices and CCS Investment:comparative study between the European Union and China
Renner, Marie (2014), Carbon prices and CCS Investment:comparative study between the European Union and China. https://basepub.dauphine.fr/handle/123456789/12983
TypeDocument de travail / Working paper
Université Paris Dauphine
Series titleLes Cahiers de la Chaire Economie du Climat
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Abstract (EN)As policy makers assess strategies to reduce greenh ouse gas emissions (GHG), they need to know the available technical options and the conditions unde r which these options become economically attractive. Carbon Capture and Storage (CCS) techniques are widely considered as a key option for climate change mitigation. But integrating CCS tech niques in a commercial scale power plant adds significant costs to the capital expenditure at the start of the project and to the operating expenditure throughout its lifetime. Its additional costs can b e offset by a sufficient CO2 price but most markets have failed to put a high enough price on CO2 emissions: currently, the weak Emission Unit Allowances price threatens CCS demonstration and deployment in the European Union (EU). A different dynamic is rising in China: a carbon regulation is setting up and CCS techniques seem to encounter a rising interest as suggest their inclusion in the 12th Five-Year Plan and the rising number of CCS projects identifies/planned. However, there are very few in-depth techno-economic studies on CCS costs. This study investigates two related questions: how much is the extra-cost of a CCS plant in the EU in comparison with China? And then, what is the CO2 price beyond which CCS power plants become more profitable/economically attractive than classic power plants, in the EU and in China? To answer these questions, I first review, analyze and compare publ ic studies on CCS techniques in order to draw an objective techno-economic panorama in the EU and China. Then, I develop a net present value (NPV) model for coal and gas plants, with and without CCS, in order to assess the CO2 price beyond which CCS plants become the most profitable power plant type. This CO2 value is called CO2 switching price. I also run some sensitivity analyses to assess the impact of different parameter variations on this CO2 switching price. I show that CCS power plants become the most profita ble baseload power plant type with a CO2 price higher than 115 €/t in the EU (offshore transport and storage costs) against 33 €/t (onshore transport and storage costs) or 47 €/t (offshore tr ansport and storage costs) in China. When the CO2 price is high enough, CCS gas plants are the most profitable power plant type in the EU whereas these are CCS coal plants in China. Through this study, I advise investors on the optimal power plant type choice depending on the CO2 market price, and suggest an optimal timing for CCS investment in the EU and China.
Subjects / KeywordsPolitique de l'environnement; Fiscalité écologique; Taxe sur le dioxyde de carbone; Captage et stockage du dioxyde de carbone; Gaz à effet de serre; Réduction
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