Willingness to Pay for a Climate Backstop: Liquid Fuel Producers and Direct CO 2 Air Capture
Abstract
We conduct a sensitivity analysis to describe conditions under which liquid fuel producers would fund the development of a climate backstop. We estimate (1) the cost to develop competitively priced direct CO 2 air capture technology, a possible climate backstop and (2) the effect of this technology on the value of liquid fuel reserves by country and fuel. Under most assumptions, development costs exceed individual benefits. A particularly robust result is that carbon prices generate large benefits for conventional oil producers—making a climate backstop unappealing for them. Unilateral investment does become more likely under: stringent carbon policy, social discount rates, improved technical outcomes, and high price elasticity of demand for liquid fuels. Early stage investment is inexpensive and could provide a hedge against such developments, particularly for fuels on the margin, such as tar sands and gas-to-liquids. Since only a few entities benefit, free riding is not an important disincentive to investment, although uncertainty about who benefits probably is. doi: 10.5547/ISSN0195-6574-EJ-Vol33-No1-3
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DACCS costs have been modeled to decline well below $100 per tCO2 for example in combination with low-cost PV, batteries and heat pumps in 2050 in favorable locations.
“DACCS cost have been modeled to decline well below $100 per tCO 2 54,55,68 for example in combination with low-cost PV, batteries and heat pumps in 2050 in favorable locations.45”
From The mutual dependence of negative emission technologies and energy systems (2019) · cites this paper as [55]
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References 70 · Cited by 29
- Authors
- Nemet, G. F., & Brandt, A. R.
- Affiliations
- Stanford University (US)
- Venue
- The Energy Journal
- Publisher
- SAGE Publications
- Published
- 2011-01-01
- Volume
- 33
- Issue
- 1
- Pages
- 53-82
- ISSN
- 0195-6574 (ISSN-L)
- 1944-9089
- OpenAlex
- W3121327094
- Cited by
- 29
- References
- 70
- Citations by year
- 2026: 1 · 2025: 3 · 2024: 4 · 2023: 4 · 2021: 3 · 2020: 1 · 2019: 4 · 2018: 2 · 2015: 2 · 2014: 1 · 2013: 3 · 2012: 1
- FWCI
- 4.06
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Energy Journal (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Economics, Econometrics and Finance › Finance › Capital Investment and Risk Analysis
- Physical Sciences › Engineering › Mechanical Engineering › Carbon Dioxide Capture Technologies
- Keywords
- willingness to pay, carbon pricing, oil producers, development costs, free-riding, oil sands, gas-to-liquids, social discount rate, demand elasticity, climate policy
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