Rate of return requirement for climate versus petroleum projects

Magne Emhjellen and Petter Osmundsen
Additional contact information
Magne Emhjellen: Petoro

No 2012/7, UiS Working Papers in Economics and Finance from University of Stavanger

Abstract: Many sosio-economic rates of returns for climate projects have been used in analysing the present value of the climate benefit. However, little attention has been devoted to profitability assessments based on commercial considerations. Economic valuation of climate projects, seen from the perspective of a commercial company, is the subject of this article. In particular, we examine the required rate of return for a project where the uncertainty in the CO2 quota price is the main market uncertainty. We complement the existing climate literature by examining the required rate of return of a climate project in a Capital Asset Pricing Model (CAPM) setting. We find that the CO2 quota price has slightly more systematic risk in the period calculated than the oil price, and estimate the nominal required rate of return for the value of CO2 reduction to be 7.3 percentage points.

Keywords: Climate Projects; Decision Analysis (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2012-04-11
New Economics Papers: this item is included in nep-ene, nep-env and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://dl.dropbox.com/u/8078351/uis_wps_econ_fin/u ... jellen_osmundsen.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://dl.dropbox.com/u/8078351/uis_wps_econ_fin/uis_wps_2012_7_emhjellen_osmundsen.pdf [301 Moved Permanently]--> https://dl.dropbox.com/u/8078351/uis_wps_econ_fin/uis_wps_2012_7_emhjellen_osmundsen.pdf)

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:hhs:stavef:2012_007

Access Statistics for this paper

More papers in UiS Working Papers in Economics and Finance from University of Stavanger University of Stavanger, NO-4036 Stavanger, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by Bernt Arne Odegaard ().