Carbon capture technology – who will pay the cost?

By | May 14, 2009

powerThe Today programme this morning had a feature on a capture carbon initiative at a coal fuelled power station in Scotland.  The feature covered the technology and environmental issues extensively, but didn’t address the economic questions that are integral to this issue.  This got me thinking – how much is this going to cost us?

According to Haq et al. , each of us in the UK has a carbon footprint of just under 12 tonnes per year, of which 3 tonnes comes from the “home and energy”.   As the average household has 2.36 people according to the Office of National Statistics , this is around 7 tonnes of CO2 emissions from each home each year.  Gough and Shackley estimate the costs of carbon dioxide storage in the UK at between £25 and £60 per tonne of CO2.

A bit of simple maths then reveals that the cost of capturing all the carbon from the average home is likely to increase fuel bills by between £175 and £420 per year.   This compares with the current average of around £1,300 per household per year.

Are you willing to pay this much?  Will you still be willing to pay it if and when oil prices go back to over $140/barrel?   Would you be willing to pay four times this amount to capture all your household’s carbon, rather than just that which comes from heating the home?  I think this would make an interesting follow-up feature on Today.

About Mark Freeman

Mark joined the School of Management in 2006, following previous full-time academic appointments at the Exeter Centre for Finance and Investment (University of Exeter) and the University of Warwick. He has held visiting academic positions at the Kellogg Graduate School of Management (Northwestern University), the University of California, Irvine, and the University of Technology, Sydney.

Before becoming an academic, he worked as an equity research analyst specialising in the brewing and distilling industries for stockbrokers Savory Milln and James Capel, in London. He also has corporate finance experience with United Distillers in Scotland.

Specialties: Economics of climate change, Long term funding of nuclear power, Pension funds - long term deficits