CO2 Highways for Europe: Modelling a Carbon Capture, Transport and Storage Infrastructure for Europe. CEPS Working Document No. 340/November 2010

This paper presents a mixed integer, multi-period, cost-minimising model for a carbon capture, transport and storage (CCTS) network in Europe. The model incorporates endogenous decisions about carbon capture, pipeline and storage investments. The capture, flow and injection quantities are based on given costs, certificate prices, storage capacities and point source emissions. The results indicate that CCTS can theoretically contribute to the decarbonisation of Europe’s energy and industrial sectors. This requires a CO2 certificate price rising to €55 per tCO2 in 2050, and sufficient CO2 storage capacity available for both on- and offshore sites. Yet CCTS deployment is highest in CO2-intensive industries where emissions cannot be avoided by fuel switching or alternative production processes. In all scenarios, the importance of the industrial sector as a first-mover to induce the deployment of CCTS is highlighted. By contrast, a decrease in available storage capacity or a more moderate increase in CO2 prices will significantly reduce the role of CCTS as a CO2 mitigation technology, especially in the energy sector. Furthermore, continued public resistance to onshore CO2 storage can only be overcome by constructing expensive offshore storage. Under this restriction, reaching the same levels of CCTS penetration would require a doubling of CO2 certificate prices

CO2 Highways for Europe: Modeling a Carbon Capture, Transport and Storage Infrastructure for Europe

We present a mixed integer, multi-period, cost-minimizing carbon capture, transport and storage (CCTS) network model for Europe. The model incorporates endogenous decisions about carbon capture, pipeline and storage investments; capture, flow and injection quantities based on given costs, certificate prices, storage capacities and point source emissions.The results indicate that CCTS can theoretically contribute to the decarbonization of Europe's energy and industry sectors. This requires a CO2 certificate price rising to 55 EUR in 2050, and sufficient CO2 storage capacity available for both on and offshore sites. However, CCTS deployment is highest in CO2-intensive industries where emissions cannot be avoided byfuel switching or alternative production processes. In all scenarios, the importance of the industrial sector as a first mover to induce the deployment of CCTS is highlighted. By contrast, a decrease of available storage capacity or a more moderate increase in CO2 prices will significantly reduce the role of CCTS as a CO2 mitigation technology, especially in the energy sector. Continued public resistance to onshore CO2 storage can only be overcome by constructing expensive offshore storage. Under this restriction, to reach the same levels of CCTS penetration will require doubling of CO2 certificate prices.carbon capture and storage, pipeline, infrastructure, optimization

Existing fossil fuel extraction would warm the world beyond 1.5 °C

The Paris climate goals and the Glasgow Climate Pact require anthropogenic carbon dioxide (CO2) emissions to decline to net zero by mid-century. This will require overcoming carbon lock-in throughout the energy system. Previous studies have focused on ‘committed emissions’ from capital investments in energy-consuming infrastructure, or potential (committed and uncommitted) emissions from fossil fuel reserves. Here we make the first bottom-up assessment of committed CO2 emissions from fossil fuel-producing infrastructure, defined as existing and under-construction oil and gas fields and coal mines. We use a commercial model of the world’s 25 000 oil and gas fields and build a new dataset on coal mines in the nine largest coal-producing countries. Our central estimate of committed emissions is 936 Gt CO2, comprising 47% from coal, 35% from oil and 18% from gas. We find that staying within a 1.5 °C carbon budget (50% probability) implies leaving almost 40% of ‘developed reserves’ of fossil fuels unextracted. The finding that developed reserves substantially exceed the 1.5 °C carbon budget is robust to a Monte Carlo analysis of reserves data limitations, carbon budget uncertainties and oil prices. This study contributes to growing scholarship on the relevance of fossil fuel supply to climate mitigation. Going beyond recent warnings by the International Energy Agency, our results suggest that staying below 1.5 °C may require governments and companies not only to cease licensing and development of new fields and mines, but also to prematurely decommission a significant portion of those already developed.Peer Reviewe

Kohlemärkte und CO2-Abscheidung : Modellentwicklung und Anwendungen in der Klimapolitik

Der bei COP21 in Paris erreichte Konsens eines 1.5°-2°C Ziels impliziert, dass große Teile der heute als Reserven verfügbaren fossilen Rohstoffe im Boden verbleiben müssen. Gegenwärtig zielt eine Vielzahl der Maßnahmen, die der Reduktion des Konsums fossiler Rohstoffe dienen soll, auf die Nachfrageseite ab. Ohne ein verbindliches globales CO2-Budget, sind diese Politiken jedoch anfällig für Emissionsverlagerungen und andere unerwünschte Effekte. Angebotsseitige Maßnahmen stellen alternative Politikinstrumente dar, die durch Angebotsreduktion direkt eine Reduktion des Konsums fossiler Rohstoffe bewirken können. Dabei spielt gerade die Kohle als einerseits emissionsintensivster und anderseits reichlich vorhandener fossiler Rohstoff, eine zentrale Rolle. Im ersten Teil dieser Dissertation nutze ich ein Modell des internationalen Kesselkohlemarkts (COALMOD-World), um die Effekte verschiedener angebotsseitiger Politikmaßnahmen auf die Nachfrage nach Kohle zu untersuchen. Dabei wird betrachtet, inwieweit diese dazu geeignet sind, angestrebte Reduktionen des Kohlekonsums zu erreichen. Das für die Untersuchung genutzte, partiale Gleichgewichtsmodell ist in der Lage sowohl das globale Angebot als auch die Nachfrage sowie internationalen Kesselkohlehandel zu simulieren. Über mehrere Zeitschritte hinweg umfasst es endogene Investitionen in Produktions-, Export- und Transportkapazitäten und ermöglicht die Substitution zwischen einheimischer Produktion und Importen. Das erste Politikszenario untersucht die Einführung von Export- bzw. Produktionssteuern auf Kesselkohle. Dieser Politik liegt die Idee zugrunde, dass dadurch einerseits der Konsum reduziert, andererseits, die Terms-of-Trade verbessert werden können. Zur Umsetzung des Szenarios wird COALMOD-World zu einem zweistufigen Setting erweitert. Ergebnisse zeigen, dass durch die Steuer zwar signifikante Erlöse erzielt werden können, jedoch für eine substanzielle Reduktion des Kohlekonsums eine große Koalition von Ländern, die gemeinsam eine Produktionssteuer erheben, notwendig ist. Als weitere Politikmaßnahme untersuche ich den Wegfall von Subventionen für die Kohleproduktion. Zwar zeigt die Maßnahme einen geringen positiven Effekt auf die Nettowohlfahrt, jedoch bewirkt sie keine erhebliche Steigerung des Kohlepreises. Diese wäre allerdings notwendig, um den Kohlekonsum nachhaltig zu reduzieren. Eine weitere angebotsseitige Politikmaßnahme, die aktuell diskutiert wird, ist die Einführung eines Moratoriums auf neue Kohleminen. Hierfür habe ich einen einzigartigen Datensatz zusammengestellt, der die Reserven in bereits bestehenden Minen zusammenfasst. Basierend auf verschiedenen Annahmen zu Reserven in China und Indien, untersuche ich zwei Szenarien. Die Ergebnisse deuten darauf hin, dass eine Beschränkung auf aktive Minen - unter der Annahme geringer Reserven in China und Indien - zu einer Nachfrage nach Kohle führen würde, die mit dem 2°C Ziel vereinbar wäre. Dabei wird angenommen, dass die CO2-Abscheidungs-, Transport- und Speichertechnologie (engl. Carbon Capture, Transport, and Storage - CCTS) nicht zur Verfügung steht. Im zweiten Teil dieser Dissertation wird die CCTS-Technologie, die lange Zeit dafür genutzt wurde, um neue Investitionen in Kohlekraftwerke zu rechtfertigen, kritisch beleuchtet. Ergebnisse des gemischtganzzahligen, kostenminimierenden Multiperiodenmodells CCTS-Mod zeigen, dass die Technologie keine große Rolle bei der Dekarbonisierung des europäischen Strommarkts spielen wird, selbst wenn das abgeschiedene CO2 zur tertiären Ölgewinnung (engl. CO2-enhanced oil recovery - CO2-EOR) wertsteigernd eingesetzt wird. Die Technologie könnte jedoch eine Alternative für Emissionen aus industriellen Prozessen darstellen, bei denen das CO2 zu geringeren Kosten abgeschieden werden kann. Des Weiteren zeigen die Modellergebnisse, dass Koordination für das Erzielen von Skaleneffekten bei Transport und Speicherung von CO2 eine zentrale Rolle spielt. Zuletzt wird mit ELCO ein integriertes Framework vorgestellt, welches für die Untersuchung unterschiedlicher regulatorischer Ansätze auf die Ausgestaltung eines zukünftigen Strommixes genutzt werden kann. Dabei ist die CCTS-Technologie mit ihren Prozessschritten im Detail abgebildet. Das Modell wird zur Untersuchung der UK Electricity Market Reform genutzt, um die abgebildeten Mechanismen und mögliche Modellergebnisse vorzuführen.The international consensus regarding the 1.5-2°C target in the COP21 Paris Agreement entails that most fossil fuel reserves must remain unburned. Currently, a majority of climate policies aiming at reducing fossil fuel consumption are directed toward the demand side. In the absence of a global carbon regime, these policies are prone to carbon leakage and other adverse effects. Supply-side climate policies present an alternative and more direct approach to reduce fossil fuel consumption by addressing its production. Here, coal, as both the most abundant and the most emission-intensive fuel, plays a pivotal role. In the first part of this dissertation, I use a model of the international steam coal market (COALMOD-World) to examine the effects of different supply-side climate policies and the extent to which they can achieve desired reductions in coal consumption. The partial equilibrium model is designed to replicate global patterns of coal supply, demand, and international trade. It features endogenous investments in production, export, and transportation capacities in a multi-period framework, while allowing for substitution between imports and domestic production of steam coal. The first policy examines the introduction of taxes on steam coal exports and, alternatively, on steam coal production, based on the rationale of reduced consumption and improved terms-of-trade. To this end, COALMOD-World is extended to a two-level setting. Results show that while significant revenues can be generated through a tax, substantial reductions in coal consumption can only be induced if a large coalition of producers jointly introduces a tax. A second policy analysis investigates the effects of removing subsidies for steam coal production. While the policy has a small positive net welfare effect, prices do not increase by the magnitude required to drive down coal consumption. Another supply-side policy currently discussed is a moratorium on new coal mines. I compile a unique dataset of reserves in currently active mines. Using different estimates of reserves in China and India, I set up two scenarios. I find that the low estimate of reserves would result in a coal consumption pattern compatible with a 2°C target in the absence of the Carbon Capture, Transport and Storage (CCTS) technology. CCTS technology has been used to justify prolonged use of coal for electricity generation. In the second part of this dissertation, I take a critical view on CCTS. Scenario results from the mixed-integer, multi-period, cost-minimizing network model CCTS-Mod suggest that - even in combination with CO2-enhanced oil recovery (CO2-EOR) - the technology will not play a major role in decarbonizing the European electricity system. It might be an alternative for industrial processes where CO2 can be captured at lower cost, especially in the iron and steel industry and in the cement industry. Coordination in developing transport and storage infrastructure is found to be crucial for realizing the associated economies of scale. Lastly, ELCO, an integrated modeling framework that is able to assess the implications of various regulatory approaches on the development of a future electricity mix with a detailed representation of CCTS is presented. The framework is applied to a case study of the UK Electricity Market Reform to illustrate the mechanisms and potential results attained from the model

Prospects for steam coal exporters in the era of climate policies: a case study of Colombia

Continued global action on climate change has major consequences for fossil fuel markets, especially for coal as the most carbon-intensive fuel. This article summarizes current market developments in the most important coal-producing and coal-consuming countries, resulting in a critical qualitative assessment of prospects for future coal exports. Colombia, as the world’s fourth largest exporter, is strongly affected by these global trends, with more than 90% of its production being exported. Market analysis finds Colombia in a strong competitive position, owing to its low production costs and high coal quality. Nevertheless, market trends and enhanced climate policies suggest a gloomy outlook for future exports. Increasing competition on the Atlantic as well as Pacific market will keep coal prices low and continue pressure on mining companies. Increasing numbers of filed bankruptcies and lay-offs might be just the beginning of a carbon bubble devaluing fossil fuel investments and leaving them stranded. Colombia largely supplies European and Mediterranean consumers but also delivers some quantities to the US Gulf Coast, and to Central and South America. Future coal demand in most of these countries will continue to decline in the next decades. Newly constructed power plants in emerging economies (India, China) are unlikely to compensate for this downturn owing to increasing domestic supply and decreasing demand. Therefore, maintaining or even increasing mining volumes in Colombia should be re-evaluated, taking into account new economic realities as well as local externalities. Ignoring these risks could lead to additional stranded investments, aggravating the local resource curse and hampering sustainable economic development

The death spiral of coal in the U.S.: will changes in U.S. Policy turn the tide?

The administration of U.S. President Donald Trump has promised to stop the ongoing spiralling down of the U.S. coal industry. We discuss the origins of the decline and assess the effects of policy interventions by the Trump administration. We find that, with fierce competition from natural gas and renewables, a further decrease of coal consumption must be expected by the old and inefficient U.S. coal-fired electricity generation fleet. By contrast, we consider the overly optimistic (for coal producers) view of the U.S. Energy Information Agency, and test whether the tide for the U.S. coal industry could turn as a result of three potential support measures: (i) revoking the Clean Power Plan (CPP); (ii) facilitating access to the booming Asian market; and (iii) enhanced support for Carbon Capture, Transport and Storage (CCTS) technology. We investigate the short-term and long-term effects on U.S. coal production using a comprehensive partial equilibrium model of the world steam coal market, COALMOD-World (Holz, Haftendorn, Mendelevitch, & von Hirschhausen, 2016). We find that revoking the CPP could stop the downward trend of steam coal consumption in the U.S., but even allowing for additional exports, will not lead to a return of U.S. coal production to the levels of the 2000s, that is, over 900 Mt per year. When global steam coal use is aligned with the 2°C climate target, U.S. steam coal production drops to around 100 Mt per year by 2030 and below 50 Mt by 2050, even if CCTS is available and exports via the U.S. West Coast is possible.Peer Reviewe