Faculty Workshop: Incentives for Early Adoption for Carbon Capture Technology
February 27, 2014 3:15pm - 4:45pm
This event was originally scheduled for February 5th, 2014 and has been rescheduled for February 27th, 2014.
This month's Faculty Workshop features Research Fellow Stephen Comello's work on incentives for early adoption for carbon capture technology.
We analyze a policy proposal for regulating the next generation of stationary power sources in the U.S. The cornerstone of this regulation is a (hypothetical) EPA mandate for an emission limit of 80 kg of carbon dioxide per megawatt-hour of electricity generated. The mandate would go into effect at the end of 2027 for all power generating facilities that come into operation after 2017. Fossil fuel power plants could meet the standard by capturing between 80-90% of their current carbon dioxide emissions. While the initial cost of complying with this standard is relatively high for first-of-a-kind facilities, learning effects are projected to reduce this cost substantially by the end of 2027, provided new facilities consistently adopt carbon capture technology in the intervening years. We identify a combination of investment- and production tax credits that provide the required incentives for new facilities to be willing to comply with the 80 kg carbon dioxide emission standard ahead of the mandate. Due to the anticipated learning effects, the incremental cost associated with the stricter emission limit is projected to about 1.2¢ per kilowatt-hour of electricity in the long run.