EURO 2024 Copenhagen
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1766. Location- and Volume-Based Subsidies for CCS: A Game-Theoretical Approach

Invited abstract in session WC-22: Environment and climate change, stream Energy Management.

Wednesday, 12:30-14:00
Room: 81 (building: 116)

Authors (first author is the speaker)

1. Adrien Nicolle
2. David Lowing
GATE Univ. Lyon-St-Etienne

Abstract

Despite being an essential technology in industrial decarbonization scenarios, Carbon Capture and Storage (CCS) struggles to reach large-scale deployment. To tackle this issue, public entities have set up numerous funding mechanisms to kickstart the adoption of this technology. However, these mechanisms generally support only the capture stage of the CCS value chain, thus overlooking support for dedicated transport and storage providers. In contrast, this paper develops a distribution rule to allocate a subsidy budget to the entire CCS value chain. First, we derive a cooperative game based on the cost-minimizing pipeline network connecting emitters to storage sites. We find that the Shapley value, typically computationally challenging, is attainable in polynomial time due to the specific structure of our problem. We then define each emitter's subsidy claim from public entities by combining the emitters' network cost shares (i.e., location) with their cost of capturing CO2 (i.e., volumes). Because public entities may lack sufficient resources to cover all emitters' claims, we turn to bankruptcy theory and apply a division rule known as the Constrained Equal Awards rule, which we normatively justify by axioms relevant to our context. We prove that the spatial dimension substantially impacts the results of the distribution rule. From a policy perspective, our paper's findings suggest that current approaches should not overlook the location of industrial emitters.

Keywords

Status: accepted

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