Social acceptance and optimal pollution: CCS or tax?

Social acceptance and optimal pollution: CCS or tax? / Pierre-André Jouvet et Marie Renner, Chaire énergie climat, Paris Dauphine, 2014, 38 p. (working paper 2014-03)

Authors’s abstract :

The two main hurdles to a widespread carbon capture and storage (CCS) deployment are: cost and social acceptance issues. Assessing accurately social preferences is thus interesting to determine whether CCS is socially optimal. Unlike most academic papers that have a dichotomous approach and consider either the atmospheric pollution (first source of marginal disutility) or the underground pollution (second source), we consider the problem as a whole: CCS techniques introduce a third source of disutility due to the simultaneous presence of CO2 in the atmosphere and in geological formations. The model and the numerical simulations show that there exist some configurations of social preferences for which CCS grants a higher social welfare provided that public authorities tax the carbon content of fossil fuels and subsidize carbon storage. CCS can even increase simultaneously the social welfare of the country with CCS and the one of the country without. From the perspective of minimizing the decarbonizing costs, we compare the case where each country defines its climate policy and when they are aggregated, in order to assess the transfers required to encourage CCS deployment.

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