Financing the Reduction of Greenhouse Gas Emissions: A New Allocation System for Dependent Risks

Lorena Remuzgo, Carmen Trueba and José María Sarabia

Chapter 19 in Handbook of Energy Finance:Theories, Practices and Simulations, 2020, pp 451-466 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The allocation of fixed resources among multiple dimensions is a usual challenge faced by natural resource managers. In this chapter, we propose a capital allocation framework for assigning financial resources among multiple environmental dependent risks. This approach relies on the use of the multivariate gamma distribution as a formal model for the estimation of different capital allocation principles, given its properties of dependence and positive skewness. The presented methodology is applied to the CO2, CH4 and N2O emissions of the EU-28 in 2013 in order to determine the incomes we should use for financing the reduction of the risks related to each gas. Our results indicate that CO2 is the riskiest pollutant, and then more capital is allocated to it. Finally, using simulation techniques, we study the sensitivity of our results.

Keywords: Energy Finance; Financial and Economic Modeling; Volatility; Forecasting; Quantitative Finance; Energy Markets (search for similar items in EconPapers)
JEL-codes: G20 G32 Q40 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789813278387_0019 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789813278387_0019 (text/html)
Ebook Access is available upon purchase.

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:wsi:wschap:9789813278387_0019

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().