Comparative Analysis of Carbon Capture and Storage Finance Gaps and the Social Cost of Carbon

Abstract

This paper evaluates how changes in economic market and policy conditions, including the establishment of a per-unit tax on unabated emissions of carbon dioxide (CO2) set equal to estimates of the social cost of carbon (SCC), influence the economics of carbon capture and storage (CCS) for two hypothetical power generation facilities located in the United States. Data are provided from modified versions of models and resources created and managed by the National Energy Technology Laboratory. Changes in economic market and policy conditions are evaluated over a series of scenarios in which differences in the levelized cost of electricity (LCOE) provide estimates of the financial gap necessary to overcome for CCS to be considered the cost-minimizing choice for each power generation facility type considered. Results suggest that for the coal and natural gas power generation facilities considered, a per-unit tax set equal to an SCC exceeding $123 per metric ton of CO2 (/tCO2) emitted (2018 dollars) and $167/tCO2 emitted, respectively, in combination with current Section 45Q tax credits, yields investment in CCS as the cost-minimizing choice; SCC values as low as $58/tCO2 and $98/tCO2 can make CCS the cost-minimizing choice with additional support policies (e.g., free transportation and storage options).

Keywords

• social cost of carbon
• carbon capture and storage
• negative externality
• financial gaps
• economic efficiency