This work was developed by Romain Presty in the frame of his PhD research.
Abstract
A multi-country equilibrium model has been developed to assess how engineered carbon removals (BECCS and DACCS) can be integrated into the EU Emissions Trading System (ETS). The goal is to understand what this implies for volumes, prices, technology mix, and the geographic distribution. The model couples country-specific removal cost functions with an aggregate marignal abatement cost under the legislated ETS cap (2025–2050). The study finds that the inclusion of engineered removals into the EU ETS helps in decreasing the 2050 market allowance price from 456.4 EUR/tCO2 with no CDR to 386.2 EUR/tCO2 with an unconditional fungibility inclusion, effectively reducing the burden to net-zero on current EU ETS emitters. Using a conditional fungibility or a reverse auction mechanism to limit potential risks associated to a free and unlimited inclusion of removals, compliance cost can still be lowered. National comparative advantages strongly shape where removals occur: Sweden, France and Germany together supply about 82% of cumulative removals under unconditional inclusion. BECCS attracts early investors until biomass becomes scarcer and costs rise. Whereas DACCS is scaling later as learning reduces unit costs and low carbon electricity becomes available. Uncertainty related to energy consumption, DACCS technology, and electricity decarbonization becomes evident. However, the scenarios with a threshold objective drastically reduce this uncertainty.
The full article is available here.
