| Registro completo |
| Provedor de dados: |
AgEcon
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| País: |
United States
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| Título: |
Inducing Low-Carbon Investment in the Electric Power Industry through a Price Floor for Emissions Trading
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| Autores: |
Brauneis, Alexander
Loretz, Michael
Roland, Mestel
Palan, Stefan
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| Data: |
2011-12-19
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| Ano: |
2011
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| Palavras-chave: |
Carbon price
Price floor
Technological change
Investment decision
Real option approach
Resource /Energy Economics and Policy
D81
O38
Q55
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| Resumo: |
Uncertainty about long-term climate policy is a major driving force in the evolution of the carbon market price. Since this price enters the investment decision process of regulated firms, this uncertainty increases the cost of capital for investors and might deter invest-ments into new technologies at the company level. We apply a real options-based approach to assess the impact of climate change policy in the form of a constant or growing price floor on investment decisions of a single firm in a competitive environment. This firm has the opportunity to switch from a high-carbon “dirty” technology to a low-carbon “clean” technology. Using Monte Carlo simulation and dynamic programming techniques for real market data, we determine the optimal CO2 price floor level and growth rate in order to induce investments into the low-carbon technology. We show these findings to be robust to a large variety of input parameter settings.
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| Tipo: |
Working Paper
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| Idioma: |
Inglês
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| Identificador: |
http://purl.umn.edu/119096
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| Relação: |
Fondazione Eni Enrico Mattei (FEEM)>Climate Change and Sustainable Development
CCSD
74.2011
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| Formato: |
34
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