Social Acceptance and Optimal Pollution: CCS or Tax?

Abstract

The two main hurdles to a widespread carbon capture and storage (CCS) deployment are its cost and social acceptance issues. Assessing accurately social preferences is thus interesting to determine whether CCS techniques use is socially optimal. Unlike most academic papers that have a dichotomous approach and consider either the atmospheric pollution (first source of marginal disutility) or the underground pollution (second source), the problem is considered as a whole: CCS introduces a third source of disutility due to the simultaneous presence of CO2 in the atmosphere and in geological formations. We show that there are some configurations of social preferences for which CCS use grants a higher social welfare provided that public authorities tax the carbon content of fossil fuels and subsidise carbon storage. CCS can even increase simultaneously the social welfare of the country with CCS and the one of the country without. Tied with the idea of minimising the decarbonizing costs and with the large literature on burden sharing in greenhouse gas (GHG) mitigation, two cases are compared to assess the transfers required to encourage CCS deployment: the case where each country defines its own climate policy and when they are aggregated.