Examining the relationship between shale gas production and carbon capture and storage under CO2 taxes based on the social cost of carbon

One of the major challenges of the U.S. energy policy is to achieve greenhouse gases emissions reductions at low cost. Economists tend to prefer policies that effectively establish a price of emissions. This paper examines the impacts of carbon taxes that are equal to the social costs of carbon on the U.S. energy system in the long-term future under different assumptions on the potential of shale gas development and with respect to carbon capture and storage deployment. The analysis shows how the mutual effects of substitution within both the supply and demand-side play an important role in constraining or enabling the penetration of shale gas into the energy mix. The study discusses multiple scenarios and helps guide policy making by identifying areas where, and the extent to which, climate policy can reinforce energy objectives in the U.S. Published by Elsevier Ltd.