Evaluation of cooperative mitigation: captured carbon dioxide for enhanced oil recovery

Robust mitigation options will play significant role in achieving the target of limiting global change to below 1.5 °C above pre-industrial levels by 2100. To support cooperation for mitigation development, we establish a real options-based model to evaluate the rational decisions of exercising the abandon option for carbon capture and storage-enhanced oil recovery (CCS-EOR) projects under oil market and geological uncertainties. Three possible cooperative mechanisms (fixed carbon dioxide (CO₂) price, oil-indexed CO₂ price, and joint venture contracts) among CO₂-EOR stakeholders are evaluated. The results show that the conflicts in profit maximization targets for different stakeholders in cooperative mitigation are to a great extent unable to be avoided. A joint venture business model is preferred in cooperative mitigation as it can effectively weaken such conflicts. And it is more reasonable to provide incentives to the downstream of the CO₂-EOR chain than compensating the adoption cost of carbon capture technologies in the upstream. From a global perspective, the inefficient cooperation can be a main barrier that hinders the development of deep-cutting options. Global mitigation strategies should not only focus on promoting technology progress but also the design of innovative business models to balance the benefits among stakeholders. A joint venture business model is recommended in both the developed and developing countries for seizing the early mitigation opportunities.