The Economics of CO2 Sequestration Through Enhanced Oil Recovery

Abstract

In this paper, we provide an overview of the economics of sequestration through CO2-enhanced oil recovery (EOR), at both the micro level of individual EOR projects and the macro level of the oil market as a whole. At the micro level, a key result is that EOR operators incentives to co-optimize oil production and CO2 sequestration are much more sensitive to oil prices than to sequestration subsidies. At the macro level, a key result is that the introduction of EOR may not displace any conventional production at all, though it necessarily will delay the development of some new sources of production. The implication is that, unless EOR projects utilize on average as much CO2 per incremental barrel produced as the CO2 generated when that barrel is consumed, they may not reduce carbon emissions overall.