Economic modeling of the global adoption of carbon capture and sequestration technologies

As policy makers consider strategies to reduce greenhouse gas emissions, they need to understand the available options and the conditions under which these options become economically attractive. This paper explores the economics of carbon capture and sequestration technologies as applied to electric generating plants. The MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy, is used to model carbon capture and sequestration (CCS) technologies based on a natural gas combined cycle (NGCC) plant and an integrated coal gasification combined cycle (IGCC) plant. These technologies have been fully specified within the EPPA model for all regions of the world by production functions. We simulate the adoption of these technologies under scenarios with and without carbon taxes. The results illustrate how changing input prices and general equilibrium effects influence the global adoption of carbon sequestration technologies and other technologies for electricity production. Rising carbon prices lead first to the adoption of NGCC plants without carbon capture and sequestration followed by IGCC plants with capture and sequestration as natural gas prices rise.