Pricing Contracts Under Uncertainty in a Carbon Capture and Storage Framework

- A “pay at the gate” carbon capture and storage (CCS) business model
- A contract between a carbon storage operator and an emissions producer
- Optimal contract decisions under both emissions and capture cost uncertainty that maximize the storage operator's expected profit
- A variety of distributions and correlated capture costs and emissions quantity
- Both analytical and numerical optimal contract results

Carbon capture and storage (CCS) has been demonstrated as a viable option for reducing carbon emissions to the atmosphere. We consider a situation where a tax on emissions is imposed on carbon dioxide (CO2) producers to encourage their participation in CCS. Operators of CO2 transportation pipelines and storage sites enter into individual contracts with emissions producers to store CO2. We study the problem of selecting the optimal price and volume of these contracts under both cost and emissions uncertainty to optimize the storage operator's expected profit.