Multi-Variable Simulation Decomposition in Environmental Planning: An Application to Carbon Capture and Storage

My PhD examiner, Julian Scott Yeomans, challenged me to apply SimDec elsewhere. I will not lie, I was surprised it worked. Not only did it work technically, it exposed structural effects that a standard Monte Carlo analysis would have left buried inside a single histogram.

In this study, we model a 600 MW coal power plant with carbon capture and storage investment and examine how subsidies interact with uncertain carbon prices over a 35-year horizon. Using Monte Carlo simulation combined with SimDec, we decompose the NPV distribution into six multi-variable scenarios defined by carbon price levels and subsidy levels. The decomposition makes one insight visually unavoidable: if subsidies depress carbon prices, most investment cases collapse into unprofitability, and higher subsidies do not rescue the project — they undermine the carbon market itself.