The field of CDR suffers from the perception that, because CDR won’t be needed at large scale for several decades, we can focus our efforts on developing and deploying other approaches to preventing climate change (such as energy efficiency and renewable energy). What’s missing from this line of thought is the fact that the eventual need for CDR has potentially large impacts on which of today’s clean energy technologies we should build.
In particular, only some of today’s low-/no-carbon technologies come with embedded options to transition to negative-carbon technologies when such negative emissions are needed in the future.
Take, for example, a public utility commission (PUC) trying to decide whether to build one of two projects:
- A wind + energy storage power development, or
- A coal fired power plant with carbon capture and sequestration (CCS).
Assuming that both projects could provide equal amounts of baseload power at roughly the same cost and carbon emission profile today, the PUC might prefer to build wind plant because it requires less land, has a less environmentally damaging supply chain, etc.
The following graphic reveals that this decision might come back to bite the PUC in the long run:
If the PUC chooses to build the wind power plant and there is no need for large scale CDR in several decades, then no further investment is required. But if the PUC does need to procure additional amounts of CDR, the wind + storage plant will be unable to provide that capability. In this future scenario with a high need for CDR, if the PUC had built the coal+CCS project, it could choose to retrofit the plant to a biomass+CCS power plant capable of removing carbon from the atmosphere at a relatively small incremental cost.
In other words, the coal+CCS power plant has an “embedded option” to convert to a bio-CCS plant, which would be potentially quite valuable in a world with a high demand for CDR.
Even though the PUC might never exercise the option to retrofit its coal+CCS power plant to a bio-CCS one capable of CDR, the option to do so has value today. As a result, it is important for the PUC (and all other energy policymakers) to understand the value of this CDR option today, so they can optimally incentivize the development of clean energy technologies.
To date, I haven’t seen any estimates of the CDR option value embedded in clean energy technologies such as fossil-CCS and bioenergy plants. And even though the need for CDR might be relatively far away, the need to value these options is urgent if we want to ensure that we pursue the optimal policies and regulations around energy and environmental technologies.