Full Title: Opportunities for Competitive Policy Mechanisms to Improve Carbon Dioxide Removal
Author(s): Philip Rossetti, Nick Loris
Publisher(s): R Street
Publication Date: October 24, 2022
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Description (excerpt):
Advances in carbon dioxide removal (CDR) technology are generating new debate around the role of government in their adoption. To date, public policy mechanisms like grants and tax credits have subsidized this technology, but questions linger about whether improved policy mechanisms could accelerate the adoption of CDR at a lower cost to the public. There is also debate regarding the extent to which government should spur CDR technology. Conventional economic theory notes that the presence of private-sector demand for a new technology should diminish the need for public support, but the commodity provided by CDR—reduced pollution— is a public good, which forces considering whether public support is warranted to best capture the benefits.
In this paper, we explain the benefits of CDR technology, its potential future role in both the public and private sectors, and how best to maximize its benefits. Importantly, this paper focuses on discerning whether there are reasonable motivations for public policy regarding CDR technology, and, if so, what structure of policy would yield the greatest benefits at the lowest cost. We focus particularly on reverse auction mechanisms, which traditionally have been highly effective at reducing commodity market costs.