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Carbon Capture and Sequestration

Carbon capture and storage (CCS) policies promote the use of CCS technologies at power plants and industrial facilities. These policies typically consist of sector- or economy-wide carbon pricing policies, or emissions limits for facilities.

Pricing policies, such as carbon capture incentives (such as the 45Q tax credits in the United States), a carbon tax, or cap-and-trade, create an economic incentive for CCS by reducing the cost of compliance and in some cases by creating a financial product that can be sold (under cap-and-trade when the CCS facility is within the cap or produces credits at below the permit price).

CO2 emissions limits are another way of encouraging CCS. These limits set maximum emissions rates for facilities burning fossil fuels, requiring the owners to install CCS in order to receive a permit. Emissions limits can be set either by the type of facility being regulated (e.g., different values for a coal power plant versus a natural gas power plant) or, better yet, can be set at one consistent value across a sector. In the latter case, emissions standards may result in less CCS facilities if it is more cost-effective to use a different technology that produces power or industrial products below the emissions limit.

For a more detailed discussion, see the applicable chapter of Designing Climate Solutions, our book on smart energy and climate policy design.