From demonstration to deployment: An economic analysis of support policies for carbon capture and storage

This paper argues that an integrated policy architecture consisting of multiple policy phases and economic instruments is needed to support the development of carbon capture and storage (CCS) from its present demonstration phase to full-scale deployment. Building on an analysis of the different types of policy instruments to correct market failures specific to CCS in its various stages of development, we suggest a way to combine these into an integrated policy architecture. This policy architecture adapts to the need of a maturing technology, meets the requirement of policymakers to maintain flexibility to respond to changing circumstances while providing investors with the policy certainty that is needed to encourage private sector investment. This combination of flexibility and predictability is achieved through the use of ‘policy gateways’ which explicitly define rules and criteria for when and how policy settings will change. Our findings extend to bioenergy-based CCS applications (BECCS), which could potentially achieve negative emissions. We argue that within a framework of correcting the carbon externality, the added environmental benefits of BECCS should be reflected in an extra incentive. (C) 2013 Elsevier Ltd. All rights reserved.