The role of real options analysis in the design of a greenhouse gas emissions trading scheme

Neil Lambie

No 47626, 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia from Australian Agricultural and Resource Economics Society

Abstract: Analysing the effect of a greenhouse gas emissions trading scheme (ETS) on energy-intensive industries using a simple model of the long-run equilibrium fails to fully capture the design implications of a scheme. When we allow for imperfect market structures and uncertainty, it is more useful to focus on how an industry is affected by the scheme’s design in moving to its long-run equilibrium. A real options modelling approach that analyses how firms in these industries are likely to respond to an ETS through their investment behaviour is proposed as a more insightful method for public policy analysis.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 27
Date: 2009
New Economics Papers: this item is included in nep-ene and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare09:47626

DOI: 10.22004/ag.econ.47626

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