The economics of CCS: Why have CCS technologies not had an international breakthrough?

Abstract

Eleven years on since the United Nations' Intergovernmental Panel on Climate Change was awarded the Nobel Peace Prize in recognition of its efforts in combating climate change, fossil fuels remain the most dominant global energy source. As the total replacement of fossil fuel energy is not expected to take place immediately in the near future, the International Energy Agency has repeatedly declared carbon capture and sequestration (CCS) as a key technology for mitigating climate change. However, CCS lacks the scale required for substantial reduction in carbon dioxide emissions from fossil fuel power generation. Even though CCS is one of the key technologies for mitigating climate change, why has this technology not had an international breakthrough? To shed light on this question, this paper employs a simple model of energy generation, scrutinizes the economic drivers of CCS based on the analytical results, and discusses the possible obstacles that can prevent a widespread rollout of the technology. This is followed by a state-of-the-art in literature pertaining to the economics of CCS, and a discussion that points to a dichotomy between the economic theory and reality. The study concludes with some policy suggestions and directions for future research.