The missing piece in policy for carbon dioxide removal: reverse auctions as an interim solution

Abstract

The expectation that carbon dioxide removal (CDR) will play a crucial role in the climate transition is starting to gain traction in policy. An increasing number of countries are expanding their CDR policies, from specification of objectives (via elimination of regulatory obstacles) to market development. Among the many CDR options, sustainably sourced bioenergy with carbon capture and storage (BECCS) is often cited as having the greatest theoretical potential. Unlocking this potential will necessitate new and robust economic incentives. However, at present, there is a serious gap between actual policy and the required incentive structures, and developing these policies in a responsible way will likely take many years. To get BECCS started sooner than it otherwise might, we argue that an interim policy for allowing BECCS to mature would help identify potential trade-offs or pitfalls, and would help test how firms react to incentives for CDR before rolling our large scale international incentive structures. In this Perspectives article, we provide an insight into the current status of BECCS and CDR policy based on interviews with key policy makers and experts. We also provide a special insight into Sweden’s development of interim policy that takes the form of a reverse auction.

Promises and Pitfalls of Bioenergy with Carbon Capture and Storage : Actors' Perspectives, Challenges, and Mitigation Deterrence in Sweden

“…The next milestone was in April 2021, when the Swedish Energy Agency published a report suggesting the use of reverse auctions to support BECCS projects (SEA 2021). According to a study by Lundberg & Fridahl (2022), most Swedish actors support this suggestion for reverse actions as an interim policy mechanism. Reverse auctions are when actors submit a bid to the government for a BECCS project, and the lowest bid wins (Lundberg & Fridahl, 2022).…”

Toward the effective and fair funding of CO2 removal technologies

“…A range of experimental national policies are emerging. For example, Sweden is pursuing reverse auctions to allocate public service contracts that deliver biomass energy with carbon capture and storage efficiently 8 . Switzerland has crafted an agreement with its waste-incineration sector to implement at least one significant facility with carbon capture for storage abroad by 2030 9 .…”

Procure, Bank, Release: Carbon Removal Certificate Reserves to Manage Carbon Prices on the Path to Net-Zero

“…Such a procurement of carbon removal could be organized via technology-specific tenders (e.g. in reverse auction system, see [23] on the prospects of such a system in Sweden) and could also be partially settled as a forward transaction. The procurement of carbon removal serves not only filling a CRC reserve (or stocking up CRCs in the MSR) but would stipulate learning-by-doing for carbon removal methods [24].…”