The LOCALISED partner, CMCC has published a paper in the journal of Frontiers in Chemical Engineering where it has developed a game theoretical framework to analyse and understand the interaction among the key players in the EU’s climate and energy policy making domain in case emerging technologies for removing carbon dioxide from the atmosphere such as direct air capture (DAC) becomes commercially available.
The model is capable of adjusting for different energy market conditions such as the monopolistic behaviour of Russia while supplying natural gas to the EU as well as the growing reliance of major EU countries such as Germany on domestic coal.
The game theory model considers two scenarios of full-cooperation among the EU member states and full-competition among them. It reveals interesting some insights into how carbon dioxide removal (CDR) technologies can affect energy security and climate change policies at the EU level.
First, if the natural gas markets are competitive and not dominated by one major player such as Russia, cooperation or competition among the EU member states will not change the incentives to deploy considerable levels of DAC to achieve climate stability targets. Nevertheless, full-cooperation among the EU member states means stronger incentives for climate change mitigation and therefore, less reliance on domestic coal, the most polluting source of energy. However, in the absence of alternative renewable energies, less coal means more natural gas and more dependency on foreign energy sources.
Second, if the natural gas market is dominated by a major player like Russia, the decisions of the EU member states to coordinate and align their climate and energy policies can influence the foreign supplier’s choice of natural gas export price. In this case, full-cooperation sends a strong signal to the supplier that the EU is committed to reducing its GHG emissions and therefore, replacing dirtier domestic coal with cleaner imported natural gas. This motivates the supplier to set a higher price for natural gas in this case but at the same time encourages the Eu to invest more in DAC to reach its climate targets. Competition among the EU member states on the other hand, forces the monopolistic supplier to offer lower gas prices to dissuade the EU countries from switching to domestic coal. In this case, DAC deployment is reduced as the stringency of any EU climate policy is jeopardised by competition among member states to meet their domestic energy demands.
In short, this analysis highlights the need for aligning the development of emerging mitigation technologies such as DAC with local mitigation and energy procurement efforts in achieving climate stabilisation targets.