Work

Dynamic Mechanisms of CCS-EOR Technology Diffusion Driven by Carbon Market Policies: An Evolutionary Game Analysis and Carbon Price Threshold Study

Year: 2026

Type: article

Abstract: Large-scale diffusion of carbon capture, storage, and enhanced oil recovery (CCS-EOR) technology requires coordinated decisions by CO2 capture and utilization enterprises, yet their economic incentives are interdependent. This study aims to explain how carbon allowance prices and allocation constraints affect bilateral CO2 pricing and the subsequent adoption of CCS-EOR technology. An alternating-offer bargaining model for determining the CO2 transaction price is coupled with a two-population evolutionary game describing the adoption decisions of capture and utilization enterprises. This integrated approach examines how carbon-market policies shape bargaining outcomes, economic returns, and adoption strategies of both enterprise types. Four techno-economic scenarios calibrated to Chinese CCS-EOR projects are examined using equilibrium analysis, numerical diffusion simulations, a ±10% parameter sensitivity analysis, and stochastic allowance price robustness tests. The critical allowance prices are 64.9 and 110.0 USD/tCO2 for low- and high-capture-cost scenarios, respectively, a difference of 45.1 USD/tCO2 (approximately 69.5% of the low-capture-cost threshold). A ±10% change in operating capture cost shifts these thresholds by ±6.15 and ±10.66 USD/tCO2, whereas the same change in levelized fixed capture cost shifts both thresholds by ±0.34 USD/tCO2. Simulations using a 19 × 19 grid of initial adoption probabilities quantify the basin of attraction of joint adoption; the critical carbon price depends on capture costs, while oil recovery benefits and other techno-economic factors affect the diffusion trajectories below the threshold. Robustness analysis is conducted, considering allowance price fluctuations under a mean-reverting process across different noise intensities (σ = 0 and 6 USD/tCO2). The findings show that carbon pricing influences utilization enterprises indirectly through bargained CO2 transaction prices and that coupling bilateral price negotiations with evolutionary adoption decisions offers a more comprehensive explanation of CCS-EOR technology diffusion and differentiated policy requirements.

Source: Energies

DOI: 10.3390/en19215325

Authors: Junli Zhang, Chuanwang Liu, Yalin Lei, Yong Jiang

Institutions: China University of Geosciences, China University of Geosciences (Beijing)

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Affordable and clean energy

Open Access status: gold

Estimated APC paid: $3,137