DAC technologies implementation as a function of oil and gas price

It is widely accepted that to achieve net zero emissions a portion of CO₂ production must be offset by CO₂ removals of some kind. It is highly suboptimal to squeeze every fossil fuel use out of society entirely, where some valuable processes continue to demand fossil fuel resources even with carbon prices of more than $₂₀₀₅10,000/tCO₂. Hence, a small residual of CO₂production exists in the majority of ambitious mitigation scenarios analysed by the IPCC^[1] which need offsetting with carbon removal.

The scale of residual CO₂ production depends on several macro-economic and technological factors which remain uncertain at present day, principally: the rate of, and limit of, market penetration for various renewable and low carbon substitution technologies; the marginal cost between a unit of fossil-fuel-derived final energy and its equivalent low-carbon alternatives, and the trajectories for these marginal costs across the mitigation period; the cost, potential scale of, and speed of deployment for novel carbon removal technologies, along with co-benefits of their deployment.

Previous research has considered the impact of varying oil and gas prices on mitigation outcomes in isolation. For example, one recent study suggests that fixing oil prices at the extremes observed over the decade 2005-2015 (low of $40/bbl, high of $110/bbl) results in mitigation outcomes shifting by the equivalent of 5-20% of the remaining carbon budget to 2°C, on an otherwise 2°C-compatible price-driven mitigation trajectory.^[2] Such uncertainty in the future price of fossil fuel resources represents a large uncertainty for the trustworthiness of our modelled mitigation scenarios to date.

One way that this 'CO₂ impact of a collapse in oil and gas prices' could be avoided is if this low fossil fuel price scenario came alongside a trajectory of rapid deployment and learning in various DAC technologies. But how realistic is this scenario, and under what conditions does it occur? Here we use the MESSAGEix^[3] integrated assessment modelling framework to determine the relationships between novel DAC technologies market penetration and the price of readily-extractible fossil fuel resources. The study uses the MESSAGEix energy system model, a perfect foresight model with 11 regions and representations of a wide range of primary, secondary, useful and final energy technologies, along with endogenous resource and technology prices, and demand/supply curves. We vary the fossil fuel resource curves, both cost of extraction and scale of available resources, alongside key parameters describing novel DAC technologies, to determine the relationship between DAC implementation and the price of oil and gas in high ambition mitigation scenarios for the 21^st century.

 

References

[1] – IPCC AR6 scenarios database (2023). https://data.ece.iiasa.ac.at/ar6/

[2] – McCollum et al. (2016). Nature Energy. Quantifying uncertainties influencing the long-term impacts of oil prices on energy markets and carbon emissions.

[3] – MESSAGEix modelling framework (2023). https://docs.messageix.org/en/latest/