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.