Renewable energy vs. direct air capture and utilization at the macroeconomic level: A Computable General Equilibruim analysis in Japan

[Geoengineering News]

https://www.sciencedirect.com/science/article/abs/pii/S0959652626000752

Authors: Bo Shi, Alexander Ryota Keeley, Shunsuke Managi

17 January 2026

https://doi.org/10.1016/j.jclepro.2026.147536

Highlights

•Direct air capture and renewable energy both play a key role in reducing CO2.

•Study about DAC with utilization of gas conversion remains gap.

•A CGE model with technological improvement studies DAC-U and RE at macro level.

•Carbon tax imposes negative impact on technological improvement on DAC-U.

•Competitiveness of DAC-U is enhanced by carbon tax more than electricity.

Abstract

Mitigating global warming relies on a combination of carbon pricing and the development of renewable energy (RE) and negative emission technologies. RE is a completely clean energy source to replace traditional fossil fuels, and direct air capture (DAC) can effectively reduce carbon dioxide concentration in the atmosphere. With technological advancement, membrane-based DAC with utilization of gas conversion (DAC-U) shows potential for carbon abatement; however, research into the large-scale deployment of DAC remains insufficient at the macroeconomic level. Furthermore, carbon pricing's potential negative impact on the large-scale deployment of DAC-U and its effects on RE development remain underexplored. Therefore, this study conducts a macroeconomic analysis to evaluate the environmental and economic impacts of carbon pricing on the large-scale deployment of DAC-U and RE development, simultaneously exploring the relationship between these two technologies. This research adopts the computable general equilibrium model, which is an effective tool to analyze the economic impact of environmental policies at the macro-level. Our results reveal a competitive relationship between RE and DAC-U under carbon taxes, where an explicit carbon tax enhances the competitiveness of DAC-U more than electricity, including RE. Furthermore, DAC-U is conducive to sustaining energy-intensive industries as the carbon tax stimulates intermediate demand for DAC-U and upstream industries. Nevertheless, the tradeoff between carbon abatement and economic growth persists, even under a carbon tax.

Source: ScienceDirect