Policy incentives for carbon capture and storage technologies in Europe: A qualitative multi-criteria analysis

In this paper, we compare different policy incentives for overcoming investment uncertainties that are typical for low-carbon technologies prior to their commercialisation, some of which may be attributable to market failures. The paper focuses on the particular case of carbon capture and storage (CCS) technologies and conducts a qualitative multi-criteria analysis of different public policy support schemes for CCS demonstration to evaluate their suitability. The assessed schemes include mandatory CCS, emission performance standards and several different financial incentives (in addition to the European Union Emission Trading Scheme). Based on the available literature and on experience in the UK and Germany with promotion instruments for low-carbon technologies, the results of our analysis suggest that two alternative schemes, a CCS bonus incentive or a carbon dioxide (CO2) price guarantee, perform best in comparison with the other assessed instruments. While they reduce the uncertainty of CCS investments in the face of low European Union Allowance prices, they also avoid significant adverse impacts on operational and investment decisions in electricity markets.

Research highlights
► We discuss investment uncertainty typical for pre-commercial low-carbon technology.
► We assess how policy incentives may reduce CCS demonstration investment uncertainty.
► We analyse adverse impacts of policies on power markets and investment decisions.
► We examine literature and experience with UK/German low-carbon technology support.
► A fixed premium to the power price (bonus) or a CO2 price guarantee perform best.