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Removing CO2 from the Atmosphere to Enable Net Negative Emissions – A Behavioural Law and Economics Perspective

Heidi Sydnes Egeland


The carbon budget compatible with the Paris Agreement temperature target is rapidly depleting. Sufficient net CO2 removal can rein in excess temperature increase. Where legislators opt for economic instruments to enable net CO2 removal, which assumptions about decision-making behaviour should they apply? Though traditional law and economics suggests that subjects of the law are typically rational maximisers, puzzling evidence from emissions trading systems suggest that we may have to consider alternative assumptions such as those offered by behavioural law and economics. Based on the idea that loss aversion may have affected firms subject to emissions trading, this article explores what the existence of loss averse preferences could mean for the efficacy of offering either charges or subsidies to incentivise CO2 removal. It argues that where decision makers exhibit loss averse rather than rational maximising preferences, charges may present more effective incentive than certain subsidies. This finding is of particular relevance for facilitating net negative emissions because legislators are currently opting for subsidies to incentivise CO2 removal. Predicting decision-making behaviour is, however, fraught with uncertainty, implying a risk for the environmental effectiveness of relying on pure economic instruments. Legislators should account for that behavioural uncertainty when choosing the proper legislative tool to enable net CO2 removal.

PhD Candidate at the Department of Energy and Resources Law, The Faculty of Law, University of Oslo, Norway. For correspondence: <>. This publication has been produced with support from the NCCS Research Centre, performed under the Norwegian research program Centres for Environment-friendly Energy Research (FME). The authors acknowledge the following partners for their contributions: Aker Carbon Capture, Ansaldo Energia, Baker Hughes, CoorsTek Membrane Sciences, Equinor, Fortum Oslo Varme, Gassco, KROHNE, Larvik Shipping, Lundin Norway, Norcem, Norwegian Oil and Gas, Quad Geometrics, Stratum Reservoir, TotalEnergies, Vår Energi, Wintershall DEA and the Research Council of Norway (257579).


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