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Carbon Capture and Storage (CCS): Analysis of Incentives and Rules in a European Repeated Game Situation

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D. Newbery, D. Reiner, T. Jamasb, R. Steinberg, F. Toxvaerd, P. Noel
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This report identifies key risks in the project selection process, including carbon price risk, variable cost risk, technological risk, and inefficiencies such as asymmetric information and collusion. A technology category auction (TCA) would deliver learning from diversity rather than from replication, which would be more appropriate for the CCS demonstration phase. To be effective, however, the TCA will require a number of demonstration projects in line with European Union (EU) objectives of 10-12 plants deployed by 2015.