Global climate change poses a threat to the well-being of humans and other living things through impacts on ecosystem functioning, biodiversity, capital productivity, and human health. Climate change economics attends to this issue by offering theoretical insights and empirical findings relevant to the design of policies to reduce, avoid, or adapt to climate change. This economic analysis has yielded new estimates of mitigation benefits, improved understanding of costs in the presence of various market distortions or imperfections, better tools for making policy choices under uncertainty, and alternate mechanisms for allowing flexibility in policy responses. These contributions have influenced the formulation and implementation of a range of climate change policies at the domestic and international levels.

Summer Institute Workshop on Public Policy and the Environment for helpful comments. We also thank

Recent policy debates suggest that geologic carbon sequestration (GS) likely will play an important role in a carbon-constrained future. As GS evolves from the analogous technologies and practices of enhanced oil recovery (EOR) operations to a long-term, dedicated emissions mitigation option, regulations must evolve simultaneously to manage the risks associated with underground migration and surface tresspass of carbon dioxide (CO2). In this paper, we develop a basic engineeringeconomic model of four illustrative strategies available to a sophisticated site operator to better understand key deployment pathways in the transition from EOR to GS operations. All of these strategies focus on whether or not a sophisticated site operator would store CO2 in a geologic formation. We evaluate these strategies based on illustrative scenarios of (a) oil and CO2 prices; (b) leakage estimates; and (c) transportation, injection, and monitoring costs, as obtained from our understanding of the literature. Major results reveal that CO2 storage in depleted hydrocarbon reservoirs after oil recovery is associated with the greatest net revenues (i.e., the “most-preferred ” strategy) under a range of scenarios. This finding ultimately suggests that GS regulatory design should anticipate the use of the potentially leakiest, or “worst, ” sites first.

Carbon capture and storage technologies in the European power market We examine the potential of Carbon Capture and Storage (CCS) technologies in the European electricity markets, assessing whether CCS technologies will reduce carbon emissions substantially in the absence of investment subsidies, and how the availability of CCS technologies may affect electricity prices and the amount of renewable electricity. To this end we augment a multi-market equilibrium model of the European energy markets with CCS electricity technologies. The CCS technologies are characterized by costs and technical efficiencies synthesized from a number of recent cost estimates and CCS technology reviews. Our simulations indicate that with realistic values for carbon prices, new CCS coal power plants become profitable, totally replacing non-CCS coal power investments and to a large extent replacing new wind power. New CCS gas power also becomes profitable, but does not replace non-CCS gas power fully. Substantially lower CCS costs, through subsidies on technological development or deployment, would be necessary to make CCS modification of old coal and gas power plants profitable.

Over the coming decades, the cost of U.S. climate change policy likely will be comparable to the total cost of all existing environmental regulation—perhaps 1–2 percent of national income. In order to avoid higher costs, policy efforts should create incentives for firms and individuals to pursue the cheapest climate change mitigation options over time, among all sectors, across national borders, and in the face of significant uncertainty. Well-designed national greenhouse gas mitigation policies can serve as the foundation for global efforts and as an example for emerging and developing countries. We present six key policy design issues that will determine the costs, cost-effectiveness, and distributional impacts of domestic climate policy: program scope, cost containment, offsets, revenues and allowance allocation, competitiveness, and R&D policy. We synthesize the literature on these design features, review the implications for the ongoing policy debate, and identify outstanding research questions that can inform policy development.

The Carbon Capture and Sequestration Technologies Program in the Laboratory for Energy and the Environment at MIT conducted a survey of public attitudes on energy use and environmental concerns. Over 1,200 people, representing a general population sample of the United States, responded. The survey asked a representative sample of the American public seventeen questions about the environment, global warming, and climate change-mitigation technologies. The analysis in this thesis uses the survey responses to draw conclusions about the level of public understanding and awareness of global climate change and carbon dioxide capture and storage and to suggest implications for public outreach. The survey results show that carbon dioxide capture and storage and carbon sequestration are largely unknown to the general public, and there is significant confusion over which environmental issue the technology is intended to address. The environment is not a top priority for the U.S. public, and global warming is not the top environmental concern, even for those concerned about the environment.

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7.1.1 Status of the sector.......................................... 451 7.1.2 Development trends......................................... 451

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