Economic impacts of carbon capture and storage on the steel industry–A hybrid energy system model incorporating technological change

Abstract

Carbon capture and storage (CCS) is necessary to reduce greenhouse gas emissions that cannot be mitigated using other reduction options. However, the high cost of CCS raises doubts about its economic feasibility. This study analyzes CCS cost reduction and its macroeconomic effects and shows that CCS can be economically feasible in the long term. This study incorporates technology learning into a hybrid energy system model and investigates its impact on the economic feasibility of CCS in the Korean steel industry. The hybrid model integrates a bottom-up energy system model and a computable general equilibrium model and overcomes the limitations of employing independent models in exploring technology learning. According to the model, in 2050, the CCS unit cost decreases by 64% when the learning rate is 20%. Due to this cost reduction, the steel industry’s additional capital and labor costs resulting from CCS adoption decrease by 60%. Moreover, although CCS adoption and diffusion reduce steel production, 60% of this production loss can be mitigated by CCS cost reduction. The cost reduction also helps to reduce the GDP loss resulting from CCS adoption by 0.3 %p.