Abstract:
A decade with public and private spending and joint efforts in developing and deploying Carbon Capture and Storage (CCS) for coal power plants in Europe have not given the desired results. CCS is currently in a position where significant investments in competence and test facilities would be worthless if the technology is not soon deployed. Hence, CCS as a technological option for mitigating climate change might be lost.
Through this master thesis, my mission has been to gain more understanding of the dynamics explaining the situation. I have made use of evolutionary theories of innovation to analyse the market and identify key barriers to CCS. Further, I have supplemented with theories of neo-classical microeconomics focusing on market failures in order to discuss how governments might secure a way forward. The theories mentioned arise from the same origin, but perceive the market differently. Evolutionary theories of innovation are helpful to understand how market transforms “from within”, and represents an important input when a government may choose to intervene “from the outside” adjusting for market failures.
Doing a research on an on-going market disruption is a challenge. There are a multitude of reports available suggesting solutions. As CCS still is not a realised, my task is to analyse real time changes. I have therefore chosen the five forces framework by Michael Porter as my methodology in order to simplify and structure my work. As my empirical data, I have employed analysis and statistics from different open sources, in addition to internal resources and my own experience.
Two sets of analysis are performed; One deals with the current situation in the coal power market. The other treats the adoption barriers against a future situation with CCS. On this basis, possible market failures and implications for future policies are discussed.
My conclusions are that a poor climate for investment in the coal power industry combined with increased business complexity and weak incentives for risk sharing appear to be critical commercial barriers to implementation of CCS. Lack of a market for CO2 storage and weak incentives for storage development, appears to be the area most overlooked. I propose current policies in Europe to be supplemented with the profiteer pays principle. This implies that new market players are invited to the battle ground where the fight against global warming has to be won.