A modelling approach that combines pricing policies with a carbon capture and storage supply chain network

Abstract

This article examines the interaction between two strategies to reduce carbon dioxide (CO2) emissions to the atmosphere: the imposition of pricing policies on carbon dioxide emissions and the decision on the network infrastructure for carbon dioxide capture and storage (CCS). The uncertainty of the storage capacity of geological reservoirs for sequestering carbon dioxide has been noted as an important issue in the deployment and cost of a CCS infrastructure. To analyse the relationships between these strategies and the uncertainty of the storage capacity of reservoirs, we propose a novel stochastic mixed-integer linear optimisation model. It minimises investment and construction costs and the costs of capture, transport, and storage of CO2 plus the cost of emitting CO2 to the atmosphere. The model considers technical and economic aspects to resolve both CO2 pricing and the design of a supply chain network for capturing, transporting, and sequestering CO2 in geological reservoirs. We present results for a sample case from the Brazilian cement industry using a CO2tax as currently established in other countries. We verify that, while the CO2 tax increases, it also increases the complexity of the pipeline network of the supply chain and the amount of CO2 that is captured and stored.