An assessment of the effectiveness of CCS technology incentive policies based on dynamic CGE model

Abstract

Large-scale carbon capture and storage (CCS) technology deployment encounters significant funding gaps, government incentives play a crucial role in its advancement. This research constructs a CGE model incorporating CCS technology to analyze the impacts of incentives - fiscal subsidy and credit financing - on CCS mitigation and economic costs at macroeconomic and sectoral levels. The findings indicate that: (1) Incentives effectively enhance CCS capture volumes (at least 80 Mt/a for subsidy, 218 Mt/a for credit), but also exacerbate the carbon emission rebound effect, diminishing their effectiveness in enhancing the net mitigation effect of CCS. (2) Incentives significantly alleviate economic losses (at least 64 billion CNY/a for subsidy, 319 billion CNY/a for credit), but also induce multi-phase macroeconomic fluctuations and short-term economic drawbacks. (3) A potential trade-off exists in sectoral incentives for CCS development: subsidy policy is more effective in promoting CCS in coal power industry, while credit policy is better suited for facilitating CCS deployment in chemical, cement, and iron and steel industries. Therefore, the implementation of incentives should enhance the energy efficiency of CCS-related sectors, mitigate the negative impacts on agriculture, light industry, services and renewable energy industries, and develop differentiated incentive programs to support sectoral CCS development.