Pollutant versus non-pollutant generation technologies: a CML-analogous analysis

Paulino Martinez-Fernandez (), Fernando deLlano-Paz, Anxo Calvo-Silvosa and Isabel Soares
Additional contact information
Paulino Martinez-Fernandez: University of A Coruna
Fernando deLlano-Paz: University of A Coruna
Anxo Calvo-Silvosa: University of A Coruna
Isabel Soares: University of Porto

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2018, vol. 20, issue 1, No 12, 199-212

Abstract: Abstract In this work, we apply the Modern Portfolio Theory and the Capital Assets Pricing Model financial tools to a portfolio of CO2-emitting generation technologies under diverse scenarios. We will calculate the efficient—in the sense of having the minimum risk for a given level of emissions—portfolios frontier. The Capital Market Line (CML) is the place where all the possible combinations of a specific efficient portfolio and a pollution-free portfolio—made up with nuclear and renewable generation technologies—lie. In Finance, that specific efficient portfolio is called the market portfolio but we will see that in our case it lacks an evident meaning. Therefore, we will explain which should be the reference portfolio for power generation planning analysis. Anyway, the fact is that those combinations are less pollutant than the portfolios in the efficient frontier. Thus, a policy-maker can analyse which is their effect on emissions reduction. We will start analysing the efficient pollutant generation portfolios. Then, we will introduce the CML-analogous lines (CML-A) to allow the possibility of reducing emissions by combining an efficient portfolio with a non-pollutant portfolio—this non-pollutant portfolio is free of both emissions and risk. Results support the necessity of considering the carbon capture and storage technology to achieve a less risky generation mix, with less emissions and allowing a higher diversification due to the presence of cleaner fossil fuel technologies. All of that leads to better levels of energy security.

Keywords: Emissions; Power generation portfolios; Portfolio theory; Capital Market Line (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10668-018-0195-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:endesu:v:20:y:2018:i:1:d:10.1007_s10668-018-0195-y

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/10668

DOI: 10.1007/s10668-018-0195-y

Access Statistics for this article

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development is currently edited by Luc Hens

More articles in Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().