Carbon allowance allocation and CO2 flows analysis in CCUS under the carbon market

Abstract

Due to high investment costs and technological uncertainties, the large-scale deployment of carbon capture, utilization and storage (CCUS) technologies faces significant challenges. Consequently, effective policy incentives are essential for catalyzing its growth. As a critical incentivization policy within the dual-carbon strategic objectives, carbon emissions trading can provide crucial support for the investment and operation of CCUS projects. This study aims to identify optimal flows of CO₂ and allocation of carbon allowance, integrating carbon tax and carbon emissions trading policies, while minimizing the regional emission reduction costs. Coal-fired power plants are taken as carbon capture objects, enhanced coal bed methane reservoirs, enhanced oil recovery formations, deep saline aquifers and depleted gas fields are taken as storage objects, and pipelines are taken as transportation mode, respectively. A mixed-integer linear programming model allowing for inter-source carbon allowance trading is developed to minimize the total annualized investment and operational costs of CCUS during the project's operational phase. The proposed model is applied to a specific case study and solved using GAMS solver. The results indicate that, under a framework that permitted carbon allowance trading among emission sources, the case achieves geological storage and utilization of 25.72 million tons of CO₂ annually, with a marginal CO₂ abatement cost of 139 CNY/t. This validates the reliability of the proposed CCUS model under the established carbon emissions trading policy and underscores the effectiveness of permitting inter-source carbon allowance trading measures in reducing the overall costs of carbon abatement projects.