Evaluating the effect of a subsidy policy on carbon capture and storage(CCS)investment decision-making in China-A perspective based on the 45Q tax credit

摘要

A trinomial tree model based on the delay real option is developed to evaluate the carbon capture and storage(CCS)retrofitting investment for existing coal-fired power plants in the context of the 45Q tax credit.The uncertainties regarding the carbon price,the CCS retrofitting investment cost,the operation and maintenance(O&M)cost,the CCS investment subsidy scenarios,and the allocation ratio of the carbon dioxide(CO2)storage subsidy between the coal-fired power plants and CO2 storage enterprises are taken into consideration.The results show that if the allocation ratio of the CO2 storage subsidy for coal-fired power plants is zero,the full government subsidy for the initial CCS investment cost and clean electricity tariff(0,015 CNY/kWh)are not sufficiently attractive for the coal-fired power plants to invest in CCS and the critical allocation ratio is 17.8% in this case.The critical allocation ratio increases to 26.4% if the government subsidy for the initial CCS investment cost is zero.Moreover,if the government subsidy for the initial CCS investment cost and clean electricity tariff are both canceled,the coal-fired power plants need to receive at least 33.3% of the CO2 storage subsidy to invest in CCS.The results provide theoretical support for the decision-making regarding CCS retrofitting investment and CCS subsidy policy-making.