Evaluation of cooperative mitigation: captured carbon dioxide for enhanced oil recovery
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Evaluation of cooperative mitigation: captured carbon dioxide for enhanced oil recovery Lei Zhu 1
& Xing Yao
2,3
& Xian Zhang
4
Received: 30 March 2019 / Accepted: 18 November 2019/ # Springer Nature B.V. 2020
Abstract
Robust mitigation options will play significant role in achieving the target of limiting global change to below 1.5 °C above pre-industrial levels by 2100. To support cooperation for mitigation development, we establish a real options-based model to evaluate the rational decisions of exercising the abandon option for carbon capture and storage-enhanced oil recovery (CCS-EOR) projects under oil market and geological uncertainties. Three possible cooperative mechanisms (fixed carbon dioxide (CO2) price, oil-indexed CO2 price, and joint venture contracts) among CO2EOR stakeholders are evaluated. The results show that the conflicts in profit maximization targets for different stakeholders in cooperative mitigation are to a great extent unable to be avoided. A joint venture business model is preferred in cooperative mitigation as it can effectively weaken such conflicts. And it is more reasonable to provide incentives to the downstream of the CO2-EOR chain than compensating the adoption cost of carbon capture technologies in the upstream. From a global perspective, the inefficient cooperation can be a main barrier that hinders the development of deep-cutting options. Global mitigation strategies should not only focus on promoting technology progress but also the design of innovative business models to balance the benefits among stakeholders. A joint venture business model is recommended in both the developed and developing countries for seizing the early mitigation opportunities. Keywords Real options . Monte Carlo simulation . Carbon capture and storage (CCS) . Enhanced oil recovery (EOR) . Cooperative mechanism of mitigation
* Lei Zhu [email protected] * Xian Zhang [email protected] Extended author information available on the last page of the article
Mitigation and Adaptation Strategies for Global Change
1 Introduction Carbon capture and storage (CCS) is viewed as the only available technology option that can mitigate the large quantities of carbon dioxide (CO2) arising from the continuous consumption of fossil fuels (Duan et al. 2019; Flude et al. 2017). High expectations have been attached to CCS as it allows continued reliance on fossil fuels (Russell et al. 2012) and great potential for mitigation strategy (Khan et al. 2019). To limit global warming to below 1.5 °C above preindustrial levels by 2100, nearly all pathways require large-scale deployment of CCS (IPCC 2018). And in the below 2 °C scenario of the International Energy Agency (IEA 2017a, b), CCS accounts for around 23% of the global cumulative CO2 emission reductions in the industrial sector over the period 2015–2060. However, the CO2 avoided cost based on current technology is estimated at over 40$/ton CO2 (Rubin et al. 2007; Spek et al. 2017; Fan et al. 2019a), which makes it unaffordable if no other incentives are
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