 The interplay between technology options, market uncertainty, and policy in zero-carbon investment decisionsLoïc De Weerdt, Carlos Oliveira, Eric D. Larson and Chris Greig Energy Economics, 2023, vol. 128, issue C Abstract: Using a real-option approach, we study the decision of a private power generator considering investment in a zero-CO2-emissions plant. Specifically, we analyze the investment decision in mutually exclusive technologies under the presence of market uncertainty, for different scenarios and under different policy regimes within each scenario. The scenarios are based on emissions targets, such as net-zero-CO2 emissions by 2050. The policy regimes are based on whether or not the targets are binding. We find that if there are fewer available zero-CO2-technology options there is less hesitation to invest, which potentially leads to earlier investment. We also find that some policies are more effective than others in encouraging investment: incentive payments are somewhat effective, penalties for not reaching zero emissions by a specified future date are more effective; a steadily increasing CO2-emission-allowance price also speeds up investment. Keywords: Energy transition; CO2-emissions targets; Investment under uncertainty; Dynamic public economics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:128:y:2023:i:c:s0140988323006643 DOI: 10.1016/j.eneco.2023.107166 Access Statistics for this article Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant More articles in Energy Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.