Application of real options in carbon capture and storage literature: Valuation techniques and research hotspots

Abstract

Carbon capture and storage (CCS) is one of the key technologies and measures for the energy transition towards achieving the climate targets. Accounting for the high uncertainty, risks, and irreversibility of CCS projects, a growing number of studies apply the real options (RO) approaches which allow flexibility in the valuation of uncertain investment. Various RO models and valuation techniques are adopted and the critical analysis of the research trends and research hotspots in RO designs in CCS investments has not been made yet. This study employs a bibliometric analysis to examine the features of CCS literature including the research focus and trends as well RO uncertainty and models, types of options, and valuation techniques. The results present a comprehensive overview of the state-of-the-art which provides researchers a concrete basis for future research and directions for further development. This further provides energy and environmental policymakers and CCS project planners with valuable insights on various aspects of CCS policy and project design.

Keywords: Bibliometric analysis; CCS; Climate change; Investment under uncertainty; Literature review; Mitigation; Real options.