[Paper Review] Sustainable financing of permanent CO2 disposal through a Carbon Takeback Obligation

Stuart R. Jenkins, Eli Mitchell-Larson+2 more|arXiv (Cornell University)|Jul 16, 2020

Climate Change Policy and Economics4 citations

TL;DR

This paper proposes a Carbon Takeback Obligation (CTO) mandating fossil fuel producers and importers to progressively increase the fraction of CO2 they permanently store, ensuring sustainable financing for permanent carbon disposal. The CTO reduces consumer costs compared to conventional carbon pricing by 2040s and enables a low-risk pathway to net zero by combining mandatory storage with emissions reduction measures.

ABSTRACT

Unless there is immediate, unprecedented, reduction in global demand for carbon-intensive energy and products, then capture and permanent storage of billions of tonnes of carbon dioxide (CO2) annually will be needed before mid-century to meet Paris Agreement goals. Yet competition from cheaper, temporary, carbon storage means that permanent disposal remains starved of investment, currently representing about 0.1% of Energy and Industrial Process (EIP) emissions. This stored fraction must reach 100% to stop EIPs causing global warming. Here we show that a cost-effective transition can occur by mandating an increasing stored fraction through a progressive Carbon Takeback Obligation (CTO) on fossil fuel producers and importers. Projected costs of storage to the consumer are lower than pricing carbon emissions in conventional 1.5{\\deg}C scenarios until the 2040s, and comparable or lower thereafter. A CTO combined with measures to reduce CO2 production would deliver the lowest-risk pathway to achieving net zero.

Motivation & Objective

• To address the lack of investment in permanent CO2 storage, which currently accounts for only 0.1% of Energy and Industrial Process (EIP) emissions.
• To identify a cost-effective policy mechanism that ensures long-term financing for permanent CO2 disposal at scale.
• To propose a regulatory framework that shifts responsibility from end-users to fossil fuel producers and importers.
• To demonstrate that a CTO can achieve net zero with lower consumer costs than conventional carbon pricing scenarios.

Proposed method

• Propose a progressive Carbon Takeback Obligation (CTO) requiring fossil fuel producers and importers to increase the fraction of CO2 they permanently store over time.
• Model the economic impact of the CTO on consumer prices, comparing it to conventional carbon pricing in 1.5°C scenarios.
• Integrate the CTO with measures to reduce CO2 production, ensuring a dual pathway to emissions reduction.
• Use scenario analysis to project costs and storage fractions through 2050, assessing feasibility and risk.

Experimental results

Research questions

• RQ1 How can permanent CO2 storage be sustainably financed at the scale required to meet Paris Agreement goals?
• RQ2 What policy mechanism can ensure that fossil fuel producers and importers internalize the cost of permanent CO2 disposal?
• RQ3 How does the cost of CO2 storage under a CTO compare to conventional carbon pricing in 1.5°C scenarios?
• RQ4 What is the optimal trajectory for increasing the stored fraction of CO2 under a CTO to achieve net zero with minimal economic disruption?

Key findings

• The projected cost of CO2 storage under a CTO is lower than conventional carbon pricing until the 2040s, making it more economically viable.
• After the 2040s, the CTO remains comparable or lower in cost than conventional carbon pricing mechanisms.
• A CTO combined with emissions reduction measures delivers the lowest-risk pathway to achieving net zero emissions.
• The CTO ensures that permanent disposal becomes financially sustainable by shifting responsibility to fossil fuel producers and importers.