 A real option-based model for promoting sustainable energy projects under the clean development mechanismHyounkyu Lee, Taeil Park, Byungil Kim, Kyeongseok Kim and Hyoungkwan Kim Energy Policy, 2013, vol. 54, issue C, 360-368 Abstract: The clean development mechanism (CDM) provides a way of assisting sustainable development in developing countries for developed countries to reduce greenhouse gas (GHG) emissions. Despite its intended benefits, the primary CDM market decreased from US$5.8 billion in 2006 to US$1.5 billion in 2010. One of the primary reasons for the reduction of market size is that developed countries as investors have a high level of risks caused by the volatility of the market price for certified emission reductions (CERs). Another issue to be resolved is that developing countries as host countries cannot claim any right to the CERs produced on their own land. This paper presents a real option-based model for both parties (developed and developing countries) to have their fair share of profits and risks by controlling the uncertainty associated with the future value of CERs. A case study illustrated that the proposed model can effectively attract investors to CDM projects leading to mitigation of climate change. Keywords: Clean development mechanism; Clean energy system; Real option (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:enepol:v:54:y:2013:i:c:p:360-368 DOI: 10.1016/j.enpol.2012.11.050 Access Statistics for this article Energy Policy is currently edited by N. France More articles in Energy Policy from Elsevier |
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