Carbon Take Back Obligation, an Economic Evaluation

The world is searching for emission pathways to ensure that the Paris climate targets are met. Net-zero-emission scenarios are key to achieving these targets. The EU also proposed net-zero-emission targets for 2050 in its Green Deal. There are currently a wide pallet of instruments to reduce emissions, mostly focussing on managing emissions on the demand side while ignoring the supply side. In this report, we analyse the economic impact of a particular supply side instrument, the Carbon Take Back Obligation (CTBO).

The CTBO is a new policy instrument that makes producers of fossil energy responsible for storing sufficient carbon. When a CTBO is introduced, fossil energy producers and importers are required to buy Carbon Storage Certificates (CSU) and in this way fulfil their CTBO. The companies that store it permanently (for example, underground) receive these CSUs and can sell them. This creates opportunities and additional financing for carbon capture and storage (CCS) projects. The CSUs confer the right to produce and import fossil energy. Tradable CSU yields — such as an emissions trading scheme — provide an efficient outcome with respect to CCS projects and fossil energy use in the market. CTBO can also stimulate negative emission technologies (for example, Direct Air Capture and Storage) and in this way ensure that, no matter how much fossil energy is still needed, the net impact on the climate can be reduced to zero.

This report analyses two scenarios: a Dutch scenario with a start-up version of CTBO for gas in the Netherlands until 2030, and an EU scenario that will analyse a long-term scenario (2030-2050) with an EU-wide version of a CTBO for all fossil energy sources in Europe. The report includes an analysis of the economic impact of a CTBO.

The report concludes that a CTBO start-up phase implementation in the Netherlands will have little economic impact, but is likely to lead to extra emission reductions. In the long run, a mature CTBO in Europe — with sufficient trade volumes of CSUs — will yield economic gains or extra emission reductions, or a combination of emission reductions and/or economic gains.

This report is a background document to the CTBO phase 2 report (De Gemeynt & Kuijper, 2022).