This award supports fundamental research to provide new knowledge toward understanding the effect of market-based incentives on the implementation of carbon capture and storage systems for reducing carbon emissions from coal and natural gas power plants. The results of this research can help policy makers evaluate proposed policies dealing with carbon capture and storage methods. Additionally, the research program encourages underrepresented undergraduate and graduate students to become researchers and will broaden science, technology, engineering and mathematics participation. The program provides pre-college students the opportunity to participate in an interactive educational activity involving both environmental science and operations management. Overall, the results from this research will benefit education at all levels from pre-college to post-graduate. The data and code developed under this award will be shared with the research community.
The research objective of this project is to determine the effect of market-based incentives on the implementation of carbon capture and storage technology through theoretical extensions of mechanism design and simulation optimization. The research team will investigate the intrinsic relationships among contract prices and quantities, cost structures, and emissions profiles using a mechanism design framework. This approach will help the storage operator decide which emissions sources to serve, what contract prices and quantities to offer to induce emission sources to participate, and what pipeline capacity to build. This research will also examine the impact of a cap-and-trade policy by incorporating permit trading explicitly in the decisions of carbon capture and storage participants, and compare the efficiency against that of a carbon tax policy. Lastly, the team will create a simulation optimization framework to optimize contract design when data is available but the mechanism design formulation is analytically intractable.
