Concerns about the cost of CO2 capture and sequestration, and the effectiveness of carbon abatement policies loom large in discussions on climate change mitigation. Several writers address the issue from various perspectives. This paper attempts to add relative realism to discussions on CO2 capture costs, and, the deployment of carbon capture technology in the UK by using publicly available company data on the long term capacity expansion and CO2 capture investment programmes of selected power plants in the UK. With an estimated £8 billion plan to install a generation capacity of 11 GW and capture capability of 44 MtCO/year, it is imperative to optimise this huge potential investment. A least-cost optimisation model was formulated and solved with the LP algorithm available in GAMS. The model was then applied to address a number of issues, including the choice of an optimal carbon abatement policy within the EU-ETS framework. The major findings of the study include (a) the long term total cost curve of CO2 capture has three phases - rising, plateau, rising; (b) alternative capture technologies do not have permanent relative cost advantages or disadvantages; (c) Government incentives encourage carbon capture and the avoidance of emission penalty charges; and (d) the goals of EU-ETS are more effectively realised with deeper cuts in the EUA ratios than merely hiking the emission penalty, as proposed in EU-ETS Phase II.
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