Pricing Contracts Under Uncertainty in a Carbon Capture and Storage Framework

Carbon capture and storage (CCS) has been demonstrated as a viable option for reducing carbon emissions to the atmosphere. We consider a situation where a tax on emissions is imposed on carbon dioxide (CO₂) producers to encourage their participation in CCS. Operators of CO₂ transportation pipelines and storage sites enter into individual contracts with emissions producers to store CO₂. We study the problem of selecting the optimal price and volume of these contracts under both cost and emissions uncertainty to optimize the storage operator's expected profit.