Keller and co-workers have shown that investing early in CO2 sequestration can be more cost-effective than previous models had suggested, due to cost savings that accrue due to “learning by doing”. They found that although sequestration may be more expensive than other abatement options in the short term, deploying CO2 sequestration early would help to overcome technological inertia and to “buy-down” the price.
Because of its large capacity, the price of carbon sequestration rises slower than the more conventional abatement options in response to increasing demand. In addition, expanding the capacity of a relatively new technology (such as carbon sequestration) is expected to reduce the marginal costs by a larger portion than expanding the capacity of more established technologies (such as carbon abatement). Carbon sequestration can thus be a more cost-effective option in the long-term compared to carbon abatement. This finding can motivate near-term investment in carbon sequestration as part of an optimal portfolio. Keller and colleagues have also shown in the framework of an economic optimal growth model that the availability of a carbon sequestration option can decrease optimal carbon taxes, reduce economically optimal CO2 concentrations (and hence expected climatic change), and have large potential economic benefits.