Collaborative Research: Optimizing Incentives for Carbon Capture and Storage Systems

Naval Postgraduate School, Monterey CA

Investigators

Abstract

The research objective of this proposal is to determine the effect of market-based incentives on the implementation of carbon capture and storage technology through theoretical extensions of mechanism design and simulation optimization. The research team will investigate the intrinsic relationships among contract prices and quantities, cost structures, and emissions profiles using a mechanism design framework. This approach will help the storage operator decide which emissions sources to serve, what contract prices and quantities to offer to induce emission sources to participate, and what pipeline capacity to build. This research will also examine the impact of a cap-and-trade policy by incorporating permit trading explicitly in the decisions of carbon capture and storage participants, and compare the efficiency against that of a carbon tax policy. Lastly, the team will create a simulation optimization framework to optimize contract design when data is available but the mechanism design formulation is analytically intractable.