The Alfred P. Sloan Foundation has awarded a team, including ORIE Assistant Professor Ben Leibowicz, a $850,000 grant to study the economics of carbon capture, utilization and storage (CCUS). The three-year project is a unique collaboration between social science scholars at The University of Texas at Austin and the University of Wyoming, supported by physical science experts at UT's Bureau of Economic Geology. It will not only develop and complete four projects on the economics of CCUS, but will also create an interdisciplinary research network to engage further study.
CCUS technologies capture carbon dioxide (CO2) at their source — power plants and industrial facilities — to either reuse or store in deep geological formations. At the state, national and international levels, policymakers are looking to CCUS as a valuable tool in their arsenal to reduce carbon pollution and combat climate change. However, CCUS development to date has been slow, with projects either stalling or shutting down due to market conditions. This project aims to analyze and understand the barriers to CCUS deployment on a large scale, including analyzing how current federal tax incentives to expand CCUS are working.
The team's research will consist of four interrelated projects on the economics of CCUS. Dr. Leibowicz is leading two of these projects in which he is applying operations research models to address questions about CCUS infrastructure investments and policy incentives designed to stimulate them. Engineering cost estimates suggest that many CCUS projects should be profitable given available policy incentives, such as the 45Q tax credit for carbon capture that is currently in place. However, there has been relatively little deployment of CCUS technologies to date. What factors explain the limited market uptake of CCUS despite favorable policies? How could policy incentives be redesigned to more effectively stimulate CCUS infrastructure deployment? These are some of the research questions that Dr. Leibowicz is investigating along with ORIE PhD student Connor Colombe and ME undergraduate Benjamin Mendoza, who are both research assistants on the project.
The first project that Dr. Leibowicz and his students are working on focuses on the extent to which policy uncertainty diminishes CCUS infrastructure investment. They are building an optimization model that decides how to build a spatial infrastructure network to capture CO2 at large point sources like power plants and industrial facilities, transport it via pipelines, and either inject it into geologic storage or sell it to companies that use CO2 in their production processes (e.g., for enhanced oil recovery). The model will incorporate uncertainty on future CCUS incentives and risk-averse investment decision-making to see how much policy risk might be weakening the case for CCUS deployment. In their second project, Dr. Leibowicz and his team will explore the hypothesis that coordination problems among the multiple actors who would need to be part of the CCUS infrastructure network are hindering development. For this effort, they will build a multi-agent market equilibrium model for CCUS in the form of a mixed complementarity problem (MCP). This modeling approach represents different types of actors (e.g., CO2 point source owners, pipeline owners, geologic storage providers, companies that utilize CO2) who all seek to maximize their own profits, leading to a market equilibrium. Dr. Leibowicz previously gained experience with the MCP modeling paradigm through a separate project on natural gas markets with Dr. Jonathan Bard and sponsored by ExxonMobil. Through this Sloan Foundation project, Dr. Leibowicz will apply these methodological concepts to CCUS as a new and important application.
