Contract Incentives for Industrial Carbon Capture - A review of design options

This type of payment is usually intended allow repayment of a portion of capital costs irrespective of the utilisation of the capture plant. [...] Bellona UK PAGE 7 1.3 Contract duration To ensure value for money for tax-payers (assumed to be the ultimate provider of funds for the contract payments), contracts should run for long enough to gain the value from operation of the plant, including benefits of reducing emissions and technological learning. [...] The net cost of subsidy to government is reduced by the expected value of the free allowances for the project. [...] The net cost of the subsidy to government is reduced by the expected value of the free allowances to the project and again contract terms need to address free allocation volume risks. [...] However, as noted, there is then the reverse risk that the benefits to the producer do not occur as expected, and the project is disadvantaged by the CfD reducing payments without the project realising benefits.