Course information | Economics of Carbon Sequestering

Aims

This course is part of the Laboratory Towards carbon negativity, an interdisciplinary program that integrates chemistry and economics to analyse the feasibility and sustainability of carbon capture technologies.
This module of the course aims to provide students with a comprehensive understanding of the economic principles, policy frameworks, and market mechanisms underpinning the development and deployment of Carbon Capture and Storage (CCS) technologies. CCS is increasingly recognized as a critical component of net-zero transition strategies, particularly in hard-to-abate industrial sectors and for the delivery of negative emissions.
The course examines CCS from an economic perspective, focusing on investment decisions, cost structures, regulatory incentives, carbon pricing mechanisms, and the role of CCS within broader energy and climate policies. Particular attention is devoted to the interaction between CCS, carbon markets, renewable energy deployment, industrial competitiveness, and long-term decarbonization pathways.
By combining economic theory with real-world case studies from Europe and other leading jurisdictions, the course enables students to critically evaluate the opportunities, limitations, and policy challenges associated with large-scale CCS deployment.
Learning Objectives

Upon successful completion of the course, students will be able to:

Understand the role of CCS in climate change mitigation and net-zero strategies, including its applications in power generation, industry, and carbon dioxide removal.
Analyze the economics of CCS projects, including capital and operating costs, transport and storage infrastructure, economies of scale, and learning effects.
Evaluate investment decisions under uncertainty, considering carbon price volatility, regulatory risks, and long-term market expectations.
Assess the effectiveness of policy instruments supporting CCS deployment, including carbon pricing, emissions trading systems, carbon contracts for difference (CCfDs), subsidies, tax credits, and regulatory mandates.
Compare CCS with alternative decarbonization options, such as renewable energy, electrification, hydrogen, and energy efficiency measures, using economic and policy evaluation frameworks.
Understand the economics of CO₂ transport and storage networks, including infrastructure planning, natural monopoly issues, and business models for shared CCS hubs and industrial clusters.
Examine the role of CCS in industrial competitiveness and energy transition policies, with particular reference to the European Union and the EU ETS.
Critically discuss the economic and ethical implications of negative emissions technologies, including BECCS and Direct Air Capture with Storage (DACCS).
Apply economic tools and quantitative methods to assess CCS projects and policy scenarios.
Develop evidence-based policy recommendations concerning the role of CCS within sustainable energy and climate strategies.

Detailed program

Module 1

Climate Change Economics and the Role of CCS (4 hours)

Lecture 1.1. Climate Change and Decarbonization Challenges (2 hours)
Topics:

Climate change as a global externality
Market failures and carbon emissions
Social cost of carbon
Net-zero targets and carbon budgets
Hard-to-abate sectors
Why mitigation alone may not be sufficient
Key concepts:
Externalities
Pigouvian taxation
Carbon pricing
Marginal abatement cost
Case study:
EU Climate Law and 2050 climate neutrality objective

Lecture 1.2. Why CCS? Economic Rationale and Policy Debate (2 hours)
Topics:

Historical evolution of CCS
CCS in IPCC scenarios
Role of CCS in net-zero pathways
CCS versus renewable-based decarbonization
Criticisms and controversies
CCS and energy security
Discussion:
"Can Europe achieve climate neutrality without CCS?"

Module 2

Economics of the CCS Value Chain (8 hours)
Lecture 2.1: Capture Technologies and Cost Structure (2 hours)
Topics:

Post-combustion capture
Pre-combustion capture
Oxy-fuel combustion
Industrial CCS applications
Economic analysis:
CAPEX
OPEX
Energy penalty
Cost of CO₂ avoided versus cost of CO₂ captured
Indicators:
Levelized Cost of Carbon Capture (LCOC)
Exercise:
Comparison of capture costs across sectors.

Lecture 2.2: Transport and Storage Economics (2 hours)
Topics:

Pipeline transport
Shipping of CO₂
Geological storage options
Storage site characterization
Economic issues:
Economies of scale
Network externalities
Natural monopoly characteristics
Infrastructure planning
Case studies:
Northern Lights
Porthos
Acorn

Lecture 2.3: Infrastructure Networks and Industrial Clusters (2 hours)
Topics:

Shared transport infrastructure
CCS hubs and clusters
Industrial symbiosis
Regional planning
Economic questions:
Cost allocation
Access regulation
Third-party access
Case study:
North Sea CCS clusters

Lecture 2.4: Cost Assessment and Project Evaluation (2 hours)
Topics:

Cost-benefit analysis
Discounting
Net Present Value
Internal Rate of Return
Applications:
Evaluation of CCS investments
Sensitivity analysis
Scenario analysis
Practical exercise:
Financial evaluation of a CCS project.

Module 3
Carbon Markets, Regulation and Policy Support (6 hours)

Lecture 3.1: Carbon Pricing and the EU ETS (2 hours)
Topics:

Economic foundations of emissions trading
Evolution of the EU ETS
Carbon price formation
Free allocation and CBAM
Questions:
When does the EU ETS make CCS profitable?
Break-even carbon prices
Exercise:
Estimating CCS profitability under different EUA prices.

Lecture 3.2: Policy Instruments Supporting CCS (2 hours)
Topics:

Investment subsidies
Tax credits
Carbon Contracts for Difference (CCfDs)
Regulatory mandates
Public procurement
Comparative analysis:
United States (45Q)
European Union

Lecture 3.3: Risk Allocation and Regulatory Frameworks (2 hours)
Topics:

Investment risk
Regulatory risk
Carbon price uncertainty
Long-term storage liability
Economic perspectives:
Real options theory
Public-private partnerships
Regulated Asset Base models
Case discussion:
Who should bear CCS risks?

Module 4
CCS, Competitiveness and Industrial Decarbonization (6 hours)

Lecture 4.1: CCS for Heavy Industry (2 hours)
Topics:

Cement
Steel
Chemicals
Refineries
Economic rationale:
Process emissions
Limited abatement alternatives
Carbon leakage
Case studies:
European industrial CCS projects.

Lecture 4.2: CCS and Industrial Competitiveness (2 hours)
Topics:

International competition
Carbon leakage
CBAM interactions
Strategic autonomy
Discussion:
Can CCS preserve industrial competitiveness in Europe?

Lecture 4.3: CCS Compared with Alternative Decarbonization Strategies (2 hours)
Topics:

Electrification
Renewable energy
Hydrogen
Energy efficiency
Methods:
Marginal abatement cost curves
Cost-effectiveness analysis
Technology neutrality
Group exercise:
Ranking alternative mitigation options.

Module 5
Negative Emissions and Future Perspectives (6 hours)

Lecture 5.1: Bioenergy with Carbon Capture and Storage (BECCS) (2 hours)
Topics:

Carbon removal economics
Biomass markets
Sustainability concerns
Economic assessment:
Cost per tonne removed
Revenue opportunities

Lecture 5.2: Direct Air Capture and Storage (DACCS) (2 hours)
Topics:

Technological characteristics
Cost drivers
Future cost reductions
Discussion:
Should governments subsidize DACCS?

Lecture 5.3
Future Business Models and CCS Scenarios (2 hours)
Topics:

CCS in net-zero scenarios
Future carbon markets
Negative emission credits
Emerging business models
Final discussion:
"The future role of CCS in sustainable development."

Prerequisites

Introductory microeconomics
Analytical methods

Teaching form

The course adopts an interactive teaching approach that combines lectures, literature-based seminars, quantitative exercises, and collaborative case-study analysis.
The course comprises 30 hours, organized into:

11 two-hour lectures (22 hours), delivered in person through traditional classroom teaching;
2 two-hour seminars (4 hours), dedicated to the reading and discussion of scientific papers, policy reports, and selected case studies;
2 two-hour case-study workshops (4 hours), during which students work in groups on the economic assessment of CCS projects, policy instruments, and investment decisions, followed by plenary discussion and presentation of results.

Textbook and teaching resource

Lynne Lewis, Thomas Tietenberg, Environmental Economics and Policy, 2020, Routledge, (selected chapters).
IPCC Special Report on Carbon Dioxide Capture and Storage
Lecture slides, notes, and additional scientific articles provided on the e-learning platform.

Semester

First semester

Assessment method

The final assessment consists of a single oral examination at the end of the course. The examination is graded on a scale from 18/30 to 30/30 cum laude and covers all topics discussed during the course. Particular emphasis is placed on the student's ability to establish connections between economic concepts, policy instruments, market mechanisms, and real-world CCS applications, demonstrating a critical understanding of the role of Carbon Capture and Storage within sustainable energy and climate strategies.

The final grade is based on the overall assessment of the following criteria:

Knowledge and understanding of economic concepts and policy frameworks related to CCS
Ability to apply economic reasoning and analytical tools to CCS-related problems and policy scenarios
Communication and argumentation skills
Critical thinking and capacity to integrate economic, environmental, and policy perspectives

Grade below 18/30
Knowledge and Understanding: The student demonstrates only a partial understanding of the fundamental economic concepts and policy frameworks discussed during the course. Connections among concepts are fragmented and poorly supported by theoretical knowledge.
Ability to Apply Knowledge and Understanding: The student identifies only a limited number of relevant economic factors and is unable to integrate them into a coherent analysis of CCS-related issues.
Communication and Argumentation Skills: The student develops a weak and poorly structured argument, characterized by significant inaccuracies and limited use of appropriate terminology.
Critical Thinking and Integration Skills: The student shows limited ability to critically evaluate CCS policies, investments, and market mechanisms, and struggles to connect theoretical concepts with practical applications.

Grade 18–22/30
Knowledge and Understanding: The student demonstrates a basic understanding of the main economic principles, policy instruments, and market mechanisms relevant to CCS, although some inaccuracies may remain.
Ability to Apply Knowledge and Understanding: The student is able to identify several relevant elements of a CCS-related problem and provide a partially coherent analysis, while still exhibiting some weaknesses in economic reasoning.
Communication and Argumentation Skills: The student presents a basic but understandable argument, with an acceptable structure and use of economic terminology, despite occasional inaccuracies.
Critical Thinking and Integration Skills: The student demonstrates a basic ability to connect theoretical concepts with policy and market applications, although the analysis remains largely descriptive.

Grade 23–27/30
Knowledge and Understanding: The student demonstrates a solid understanding of the economic foundations of CCS, including cost structures, investment incentives, carbon pricing mechanisms, and regulatory frameworks. Explanations are generally accurate and supported by appropriate theoretical references.
Ability to Apply Knowledge and Understanding: The student effectively applies economic concepts and analytical tools to evaluate CCS projects, policies, and market developments, although methodological rigor may not always be fully developed.
Communication and Argumentation Skills: The student develops a coherent and well-structured argument, using appropriate economic terminology and demonstrating good communication skills.
Critical Thinking and Integration Skills: The student critically evaluates alternative policy options and demonstrates the ability to integrate economic, environmental, and regulatory perspectives in the assessment of CCS deployment.

Grade 28–30/30 cum laude
Knowledge and Understanding: The student demonstrates an excellent and comprehensive mastery of the economic and policy dimensions of CCS, articulating complex relationships among technology costs, market incentives, regulatory frameworks, and climate objectives. Theoretical concepts are used rigorously and appropriately.
Ability to Apply Knowledge and Understanding: The student applies economic methods with a high degree of analytical rigor, providing comprehensive and well-supported evaluations of CCS investments, policies, and market outcomes.
Communication and Argumentation Skills: The student presents clear, persuasive, and logically rigorous arguments, demonstrating excellent command of economic terminology and concepts.
Critical Thinking and Integration Skills: The student exhibits advanced critical thinking skills, independently evaluating competing perspectives on CCS deployment and developing sophisticated analyses that integrate economic efficiency, environmental effectiveness, and policy feasibility.

The award of cum laude is reserved for students who demonstrate outstanding mastery of the subject, exceptional analytical ability, and an advanced capacity for critical and independent reasoning.