Upstream decarbonization through a carbon takeback obligation: An affordable backstop climate policy

Abstract

<h2>Summary</h2> In the absence of immediate, rapid, and unprecedented reduction in global demand for carbon-intensive energy and products, the capture and permanent storage of billions of tons of carbon dioxide (CO₂) annually will be needed before mid-century to meet Paris Agreement goals. Yet the focus on absolute emission reductions and cheaper, more temporary forms of carbon storage means that permanent CO₂ disposal remains starved of investment, currently deployed to capture only about 0.1% of global Energy and Industrial Process (EIP) emissions. This stored fraction, the percentage of fossil EIP emissions that are captured and permanently stored, must reach 100% to stop EIP emissions causing further global warming. Here, we show that a cost-effective transition can occur by mandating an increasing stored fraction through a progressive carbon takeback obligation (CTBO) on fossil carbon producers and importers. By emulating the behavior of an integrated assessment model (IAM) and employing conservative assumptions for the costs of permanent carbon storage, we show that projected economy-wide costs of a CTBO policy are comparable to the costs associated with achieving similarly ambitious climate goals in IAMs employing a global carbon price, or potentially lower if the perceived policy risk cost associated with a CTBO is lower than that associated with a politically determined carbon price. Compared with a global carbon price, an upstream CTBO has advantages of simple governance, speed, and controllability: equivalent carbon prices under a CTBO are reliably capped by the cost of direct air capture and storage, by ensuring deployment keeps pace with continued fossil fuel use, reducing the risk of punitive carbon prices or more draconian measures being needed to drive out the final tranche of emissions. When combined with measures to reduce CO₂ production in the near-term, a CTBO could deliver a viable pathway to achieving net-zero emissions consistent with 1.5°C by mid-century.