The Economics of CO2 Sequestration Scenarios Using Ocean Nourishment

Abstract

With the aid of a dynamic, general equilibrium model of the global economy, the optimum economic path of carbon dioxide abatement in the atmosphere can be predicted. The “optimum” sequestration path is defined as that which minimizes the economic damage caused by climate change while costing no more than the economic benefits. The prediction depends strongly on the magnitude of the assumed economic damage as a result of climate change. Ocean Nourishment is the purposeful introduction of nutrients into the ocean to sequester atmospheric carbon dioxide and increase the sustainable fish stocks. The feed stock today is natural gas but in the future could be coal. It has been found that carbon credits could be offered to the carbon market at price less $25 (1995 US $) /tonne CO2 avoided, allowing for a typical return on capital and assuming coal prices are stable (in current dollars). The potential of Ocean Nourishment generated carbon credit has been compared with the optimal trajectory carbon tax calculated from different energy models that ignore Ocean Nourishment. This comparison has been done for two emission reduction scenarios, optimum sequestration and Kyoto forever. Following the optimum sequestration path as predicted by the DICE economic model requires about 100 Ocean Nourishment plants to be constructed each decade assuming each plant sequesters 10 Mt of carbon dioxide per year in the ocean. Sensitivity studies show that the number of Ocean Nourishment plants is proportional to the magnitude of the climate change damage function. The Ocean Nourishment option has benefit-cost ratio of 2.75 compared with 1.0 (by definition) of the optimum sequestration. Climate damage to the economy is most severe in the Low Income countries and the economic model has been used to estimate the future cost in this group of countries. Assuming that their population is predetermined, the accumulated economic advantage of mitigating the climate change is $6.2 trillion (1995 US $) accumulated by 2100. The total cost of Ocean Nourishment, is estimated to be $2.5 trillion (1995 US $). The potential of Ocean Nourishment to meet the Kyoto protocol net emissions has also been studied. It has been found that in order to implement a Kyoto forever scenario, about of 150 Ocean Nourishment plants are needed with a total cost much less than the current alternative abatement strategies.