Economics of carbon dioxide removals
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School of Business |
Master's thesis
Authors
Date
2024
Department
Major/Subject
Mcode
Degree programme
Economics
Language
en
Pages
37
Series
Abstract
This master’s thesis explores the market creation considerations and pricing mechanisms for carbon dioxide removals (CDR) through a literature review. Earlier literature has found that directed subsidies towards carbon abating, and furthermore carbon removing technologies should be seen as a part of optimal and cost-effective climate policies alongside more extensively practiced carbon pricing. Building on this background, I have evaluated different market-based solutions for CDR subsidy schemes provided by the literature and applied these results to the EU’s 2050 net-zero climate targets, although the results are well applicable to regions outside the EU as well. The characteristics of CDR market design that a policy maker should consider when designing an optimal policy includes the mechanism’s financing through the public or the private sector, ability to account for possible non-permanence in removals, technology-neutrality, and scalability to large removal quantities, while also considering the carbon leakage effects possibly caused by the design.Description
Thesis advisor
Vehviläinen, IivoKeywords
carbon dioxide removal, subsidy, climate policy, cost-efficiency