A case study on risk and return implications of emissions trading in power generation investments

Harri Laurikka ()
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Harri Laurikka: Helsinki University of Technology

A chapter in Emissions Trading, 2008, pp 133-147 from Springer

Abstract: Abstract This paper explores quantitative implications of the European Union Emissions Trading Scheme (EU ETS) on power capacity investment appraisal in a deregulated market. Risk and return of three different types of power plants, a gas-fired condensing power plant; a hydro power plant with a reservoir; and an off-shore wind power farm, are studied and compared in the regulatory environment of Finland. A single-firm exogenous and stochastic price model is used to simulate possible market outcomes. The model runs suggest that emissions trading increases the expected return of all three power plant technologies. The increase in risk is significant only in the case of the gas-fired power plant.

Keywords: Investment; power generation; emissions trading (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-0-387-73653-2_9

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DOI: 10.1007/978-0-387-73653-2_9

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