 More is better, or is it? Sizing portfolios of real investment options in the transition to net-zero emissionsLoïc De Weerdt Energy Economics, 2025, vol. 149, issue C Abstract: We develop a framework to assess the relationship between a predefined portfolio of real investment options and the timing of investment. This framework is then applied to analyze the investment decision of a firm seeking to invest in a single technology for electricity generation with net-zero greenhouse gas emissions, while managing multiple investment options. Our results suggest that, in many cases, larger portfolio sizes do not impact the firm’s investment timing or may even lead to delayed investment. Furthermore, the framework allows us to identify, ex ante, the options the firm will never exercise. Consequently, we argue that expanding the portfolio with these options serves no purpose. Within this framework, we also estimate how the Inflation Reduction Act accelerates the firm’s investment timing. As an extension of our primary analysis, we propose an alternative policy design that promotes competition to further accelerate investment timing. Keywords: Investment timing; Real option analysis; Climate change mitigation legislation; Inflation Reduction Act (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:149:y:2025:i:c:s0140988325005584 DOI: 10.1016/j.eneco.2025.108731 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 |
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