Joining the CCS club! The economics of CO2 pipeline projects

The large-scale diffusion of Carbon Capture, transport and Storage (CCS) imposes the construction of a sizeable CO2 pipeline infrastructure. This paper examines the economics of a CO2 pipeline project and analyzes the conditions for a widespread adoption of CCS by a group of emitters that can be connected to that infrastructure. It details a modeling framework aimed at assessing the break-even value for joint CCS adoption, that is the critical value in the charge for CO2 emissions that is required for each of the emitters to decide to implement capture capabilities. This model can be used to analyze how the tariff structure and the regulatory constraints imposed on the CO2 pipeline operator modify the overall cost of CO2 abatement via CCS. This framework is applied to the case of a real European CO2 pipeline project. We find that the obligation to use cross-subsidy-free pipeline tariffs has a minor impact on the minimum CO2 price required to adopt the CCS. In contrast, the obligation to charge non-discriminatory prices can either impede the adoption of CCS or significantly raises that price. Besides, we compared two alternative regulatory frameworks for CCS pipelines: a common European organization as opposed to a collection of national regulations. The results indicate that the institutional scope of that regulation has a limited impact on the adoption of CCS compared to the detailed design of the tariff structure imposed to pipeline operators.