Scandinavian Working Papers in Economics

UiS Working Papers in Economics and Finance,
University of Stavanger

No 2014/8: CCS - Failing to pass decision gates

Magne Emhjellen and Petter Osmundsen ()
Additional contact information
Magne Emhjellen: Petoro
Petter Osmundsen: UiS, Postal: University of Stavanger, NO-4036 Stavanger, Norway

Abstract: There is a planning gap for CCS projects in Europe. CCS demonstration plants are not implemented as expected. This fact is at odds with optimistic valuation reports that apply socio-economic valuation criteria for climate projects. However, CCS plants are in most cases to be implemented by private companies. Economic valuation of climate projects, seen from the perspective of the commercial companies, is the subject of this article. We examine key economic parameters of 27 oil and gas projects and compare it to a CCS project. We find that the CCS project ranks the lowest on all profitability metrics, and is unlikely to be implemented by a private company. Our findings may explain why it is hard for oil companies to justify climate projects in their portfolios.

Keywords: Climate projects; decision analysis; CO2

JEL-codes: G31; G38; M21; Q48; Q51

16 pages, August 1, 2014

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