Analysis of Policy Incentives for Selection of CCS Technologies

Abstract

This paper studies the effect of policy incentives on investment strategies of carbon capture and storage (CCS) technologies. We establish CCS investment models based on real options theory for investment value evaluation of CCS, which consider CO2price, policy incentives and different CCS technologies that include the old existing CCS technology and the new one. We evaluate CCS investment option values and calculate the change of CCS investment values and thresholds due to the variation of CO2price and policy incentives. We conclude that the optimal strategy is investing in the new CCS technology when there are enough policy incentives, otherwise, it is optimal to firstly invest in the old existing CCS technology and then upgrade to the new one.