Economic assessment of the development of CO2 direct reduction technologies in long-term climate strategies of the Gulf countries

This paper proposes an assessment of long-term climate strategies for oil- and gas-producing countries—in particular, the Gulf Cooperation Council (GCC) member states—as regards the Paris Agreement goal of limiting the increase of surface air temperature to 2°C by the end of the twenty-first century. The study evaluates the possible role of carbon dioxide removal (CDR) technologies under an international emissions trading market as a way to mitigate welfare losses. To model the strategic context, one assumes that a global cumulative emissions budget will have been allocated among different coalitions of countries—the GCC being one of them—and the existence of an international emissions trading market. A meta-game model is proposed in which deployment of CDR technologies as well as supply of emission rights are strategic variables and the payoffs are obtained from simulations of a general equilibrium model. The results of the simulations indicate that oil and gas producing countries and especially the GCC countries face a significant welfare loss risk, due to “unburnable oil” if a worldwide climate regime as recommended by the Paris Agreement is put in place. The development of CDR technologies, in particular direct air capture (DAC) alleviates somewhat this risk and offers these countries a new opportunity for exploiting their gas reserves and the carbon storage capacity offered by depleted oil and gas reservoirs.

Applying the international esco concept to energy saving projects in the energy production sector in northwest Russia

The economy of the Russian Federation and its growth rate currently depend greatly on thecountry's fuel and energy industry and actual development of the business. To maintain theenergy production at least at the present level, capacity must be increased by several gigawattsannually. This sets up an extensive need for investments. One effective solution to theproblem is the realization of energy saving investments, which have very high potential inRussia.The EU project FRESCO (I 0/2003-12/2005), administered by Lappeenranta University ofTechnology, studies the possibilities to promote Finnish energy business in Northwest Russia.The project examines the ESCO concept that is proposed and anticipated to be a potentialfinance tool in energy saving projects in the target area. The international ESCO businessaims at finding solutions to the following problems: the lack of investments, undevelopedtechnology in use, ineffective energy systems, bureaucracy and risks.Potential and feasible ESCO project targets in energy production include a new pre-furnacefor utilization of bio fuels, a new economizer and a boiler automation upgrade. In the nearfuture - when markets exist - the ESCO concept could also be a finance tool in utilizing wastein energy production. For example bio waste from sawmills has significant potential as fuelfor local boilers.Through energy efficiency projects, greenhouse gas em1ss10ns can also be reduced. Theinternational climate policy brings in its own possibilities to finance energy investments andclimate projects. Russia ratified the Kyoto Protocol in February 2005 and can therefore takepart in international emissions trading in 2008 if the country observes the provisions of theProtocol concerning emission reduction units. Alternatives for carbon finance options couldbe, in addition to international emissions trading, Joint Implementation projects and GISprojects, in which so called "hot air" is utilized.