Conference Agenda

This study examines the economic rationale for Carbon Capture, Utilization, and Storage deployment, motivated by the abatement wall, which is a threshold where conventional decarbonization strategies encounter prohibitive marginal costs in hard-to-abate sectors. By constructing a social planner framework that optimizes a portfolio of polluting resource use, carbon utilization, and carbon storage, we analyze the trade-offs determining the optimal abatement mix. Our analysis reveals that an increase in the social cost of emissions does not uniformly necessitate increased carbon storage. Instead, we identify a structural dichotomy between agile economies, characterized by flexible consumption preferences and cost-effective utilization technologies, and brittle economies, which are constrained by rigidities. In agile systems, a rise in emissions intensity triggers a reallocation of resources toward efficient utilization and output reduction, rendering increased storage redundant. Conversely, brittle economies must rely on storage as a brute-force backstop. Furthermore, we demonstrate that innovation policies that reduce the cost of utilization or enhance its efficiency expand the feasible economic frontier, whereas storage serves primarily as a substitute for utilization when technological limitations are binding. These findings underscore the necessity of a differentiated policy approach that treats utilization as a value-creating substitute for raw materials, while managing storage as a necessary infrastructure for handling residual emissions.