Carbon Capture and a Commercial Market for CO2

With increasing evidence that the earth is warming at a faster rate than previously expected, there is pressure to reduce carbon dioxide (CO2) emissions on a large scale. Because carbon capture helps to internalize the CO2 externality, economists have begun to evaluate its potential. Two possibilities exist: carbon capture and storage (CCS), where CO2 is sequestered, usually underground; and the development of a commercial market, where CO 2 is used for transformation into calcium carbonate, biofuels, air conditioning, or other market options. This paper contrasts CCS with the development of a commercial market for CO2 and finds that the commercial market holds many advantages: internalization of the pollution externality, addressing the innovation externality, and revenue generation. Depending on the development of the commercial market, revenue from the sale of CO2 could partially or fully offset the cost of innovation in carbon capture technology.