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Environmental and Resource Economics

, Volume 60, Issue 1, pp 55–80 | Cite as

The Role of Carbon Capture and Sequestration Policies for Climate Change Mitigation

  • Matthias Kalkuhl
  • Ottmar Edenhofer
  • Kai Lessmann
Article

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 analyze CCS and renewable energy policies in a numerical dynamic general equilibrium model for settings of 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 can carry lower social costs compared to renewable energy policies, in particular when second-best policies are only employed temporally. 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 their own specific risks of missing the environmental target. A smart combination of both, however, can be a robust and low-cost temporary second-best policy.

Keywords

Renewable energy policy Supply-side dynamics Carbon pricing  Global warming CCS Hotelling Second-best 

Notes

Acknowledgments

We wish to thank Nico Bauer, Christian Flachsland, Michael Jakob, Brigitte Knopf, Gunnar Luderer, Robert Marschinski, Eva Schmid and Sarah Winands for useful comments on an earlier version of this paper. Elmar Kriegler provided data on resource extraction costs which helped generating Fig. 9b. We thank Reyer Gerlagh for sharing his experiences with us regarding numerical issues related to the DEMETER model. We acknowledge funding by the ‘Pakt für Forschung und Innovation’ of the Leibniz-Society, Germany.

Supplementary material

10640_2013_9757_MOESM1_ESM.pdf (473 kb)
Supplementary material 1 (pdf 473 KB)

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Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  • Matthias Kalkuhl
    • 1
    • 2
  • Ottmar Edenhofer
    • 1
    • 3
    • 4
  • Kai Lessmann
    • 1
  1. 1.Potsdam Institute for Climate Impact ResearchPotsdamGermany
  2. 2.Center for Development ResearchUniversity of BonnBonnGermany
  3. 3.Technische Universität BerlinBerlinGermany
  4. 4.Mercator Research Institute on Global Commons and Climate Change (MCC) gGmbHBerlinGermany

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