Enhancing investment strategies for CCUS deployment in China: implications from a real options-based multiphase unequal investment approach

Carbon capture, utilization, and storage (CCUS) can help transition the world toward net-zero carbon dioxide (CO₂) emissions, despite the uncertainties restricting growth in these investments. Existing studies on real options-based CCUS phased investments show subjectivity when specifying investment phases and primarily focus on the overall performance of technological advancements while neglecting the heterogeneity of technologies in different CCUS production chains. To advance robust investment in CCUS projects in China, this study develops a compound real options model to assess a two-phase investment approach encompassing fluctuating oil and carbon prices and variable learning rates for different CCUS production chains. A full-chain million-ton-scale CO₂-enhanced oil recovery project worth CNY 582 million was used in a numerical simulation to examine the impact of investment scale and timing on the project’s value and CO₂ mitigation. Results indicate that under a scenario with a moderate technological learning rate, phased investment increases the project value by at least 1.83% (490 million CNY) versus a lump-sum investment, and also reducing CO₂ mitigation by up to 21.9% (3.31 Mt). As the first-phase investment share grows from 10 to 90%, the timing of both phases is delayed but total project value rises. Faster technological learning advances the timing of both first- and second-phase investments and increases CO₂ abatement. Higher carbon prices and lower maintenance costs catalyze CCUS deployment. Such findings can assist governments and investors in formulating robust investment policies and decisions for CCUS in China, advancing the country’s low-carbon transition.