On the Governance of Carbon Dioxide Removal – A Public Economics Perspective

Edenhofer, Ottmar; Franks, R. Maximilian; Kalkuhl, Matthias; Runge-Metzger, Artur

doi:10.1628/fa-2023-0012

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On the Governance of Carbon Dioxide Removal – A Public Economics Perspective

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Edenhofer, Ottmar
Potsdam Institute for Climate Impact Research;

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Franks, R. Maximilian
Potsdam Institute for Climate Impact Research;

Kalkuhl, Matthias
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Runge-Metzger, Artur
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Edenhofer, O., Franks, R. M., Kalkuhl, M., Runge-Metzger, A. (2024): On the Governance of Carbon Dioxide Removal – A Public Economics Perspective. - FinanzArchiv - Public Finance Analysis, 80, 1, 70-110.
https://doi.org/10.1628/fa-2023-0012

Cite as: https://publications.pik-potsdam.de/pubman/item/item_29757

Abstract

Climate policy increasingly requires carbon dioxide removal (CDR). We describe its role, characterize optimal flows for non-permanent removals and describe optimal pricing regimes under different information and liability conditions. Non-permanent removal – though to a certain extent optimal – creates liabilities that warrant careful risk management. Thus, seemingly cheap land-based technologies can become expensive. We discuss possibilities for integrating CDR in the EU policy architecture and define four tasks: managing the emission cap; R&D support; quality certification of removals; management of liabilities from non-permanent CDR. We propose three institutions for these tasks: a European Carbon Central Bank, a Carbon Removal Certification Authority and a Green Leap Innovation Authority.