Optimisation-based Design of Market-based Policy Instruments for Accelerating the Uptake of CCUS for Global Refinery Decarbonisation

Abstract

Abstract CCUS is broadly heralded as a substantive opportunity to deeply offset emissions from the oil refining industry. However, high cost of capture remains a major barrier to adoption. Although developments of new technologies and infrastructure are still ongoing and poised to appreciably improve the economics for CCUS in the future, widescale deployment is still critically dependent on policy interventions. This work develops a novel optimisation-based multi-market potential assessment model to quantify the impact of combined policies in increasing market uptake and reducing mitigation cost of new CCUS technologies by 2030 among refineries considered to be operating under CCUS clusters with a shared transport and storage network business model. The methodology is applied to 512 refineries in 86 countries grouped under 8 different regions worldwide. Results show that sufficient demand among refineries can be generated from policies combined globally to trigger further cost reductions to a target cost of capture of ≤ US$40 /tCO2. Overall, 33% maximum cost savings is possible at a worldwide cost of US$ 46.3 billion shared between governments and the industry largely in the form of unified carbon taxes and grant support. Moreover, refineries in Asia, North America and Europe are more likely to lead CCUS cost savings as high as 22% due to their huge market potential and policy mix support from capital funding, tax credits for EOR and storage, and emissions allowances, as opposed to potential in Africa and Oceania. Ultimately, there is need for coordinated global efforts for policy measures for CCUS uptake.