What’s the most cost-effective policy of CO2 targeted reduction: An application of aggregated economic technological model with CCS?

Abstract

Carbon capture and storage (CCS) technology, which has been considering one of the effective carbon reduction options, is induced in the self-constructed aggregated economic technological model in this paper, and the development potential of CCS under the given climate policies is depicted. We explore the most cost-effective way of targeted CO2 abatement to reach specific climate stabilization targets by comparing the climate policies including subsidies for alternative energy, tax for fossil fuel and a combination of both. We also investigate the impacts of these policy instruments on the energy demand, consumptions, R&D activities and the performances of various carbon-free energy technologies. The main findings are as follows: first, the subsidy policy alone never offers the cheapest option to meet the reduction targets, and the policy of carbon tax is proved to be the most cost-effective way of CO2 abatement. Second, subsidy plays a limit role in promoting R&D activities of non-carbon technologies, which are driven more by the mix policy. Third, we find that the implementation of carbon tax will largely promote the development of CCS, and the share of fossil technology equipped with CCS in total will have reached around 15% by the end of 21 century. Finally, the CO2 reduction ratio for CCS keeps increasing in the present of carbon tax, and pathway of carbon abatement contribution for CCS is hump-shaped when turning to the mix policy case.