Mobilizing private funds for carbon capture and storage: An exploratory field study in the Netherlands

Investors have typically been hesitant to commit resources to the decarbonization of energy production as CCS investments combine large up-front investment outlays, a long planning horizon, different sources of uncertainty and irreversibility of the capital expenditure. The real option literature offers a vast amount of models to handle investment decisions in such a context. This exploratory study conducts structured interviews with a number of investors in the Netherlands to understand how CCS investment decisions are actually made. The interviews were based on stylized, but realistic business cases in which important real option characteristics are deliberately embedded. Our objective was to analyze whether these options were recognized and whether the decisions of those investors are in line with real option theory. We find that real option models may predict outcomes more or less adequately at the macro level, but do not (fully) describe the micro level behavior of investors. We develop some tentative recommendations for policymakers who want to promote the private funding of CCS projects and formulate the outline for follow-up research to confirm the preliminary findings of this exploratory study.