Carbon capture and storage—Investment strategies for the future?

Margarethe Rammerstorfer and Roland Eisl

Energy Policy, 2011, vol. 39, issue 11, 7103-7111

Abstract: The following article deals with real options modeling for investing into carbon capture and storage technologies. Herein, we derive two separate models. The first model incorporates a constant convenience yield and dividend for the investment project. In the second model, the convenience yield is allowed to follow a mean reverting process which seems to be more realistic, but also increases the model’s complexity. Both frameworks are to be solved numerically. Therefore, we calibrate our model with respect to empirical data and provide insights into the models’ sensitivity toward the chosen parameter values. We found that given the recently observable prices for carbon dioxide, an investment into C O2-storage facilities is not profitable.

Keywords: Carbon dioxide; Storage; Real options; Investment (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:39:y:2011:i:11:p:7103-7111

DOI: 10.1016/j.enpol.2011.08.022

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