1. Policy options for funding carbon capture in regional industrial clusters: What are the impacts and trade-offs involved in compensating industry competitiveness loss?
- Author
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Turner, Karen, Race, Julia, Alabi, Oluwafisayo, Katris, Antonios, and Swales, J. Kim
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INDUSTRIAL clusters , *CARBON sequestration , *WAGES , *CAPITAL costs , *UNEMPLOYMENT statistics - Abstract
Carbon capture and storage (CCS) is a technically feasible deep decarbonisation solution. Still it is not widely adopted, arguably due to some basic political economy and policy challenges. One issue is the large infrastructure needs of transporting and storing CO 2. However, a more fundamental challenge in the current UK industrial policy landscape is concern over introducing new costly capital requirements in industries that need to retain competitiveness in a world that has not yet fully signed up to the 'net-zero' transition demanded by the more ambitious 1.5 degrees Celsius warming target of the Paris Agreement. We take the example of high-value chemicals industries operating in the UK devolved region of Scotland and use an economy-wide computable general equilibrium (CGE) model to consider the nature and potential extent of export, GDP and employment losses under different illustrative polluter/government/taxpayer pays approaches to meeting the higher cost requirements. We conclude that the value from subsidising capture activity depends on the extent of export demand response to competitiveness losses resulting from firms bearing CO 2 capture costs. However, outcomes reflect trade-offs across different types of sectors and employment, and are also dependent on labour market responses to changing wage and unemployment rates. • Carbon capture involves sustained additional operating capital costs for industry. • Reduced capital efficiency impacts regional prices and industry competitiveness. • Regional GDP, jobs and earnings losses are dominated by capturing industry losses. • The extent of losses is governed by trade responses to reduced competitiveness. • A subsidy approach funded shifts the burden to household or public spending. [ABSTRACT FROM AUTHOR]
- Published
- 2021
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