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Stochastic Income Statement Planning and Emissions Trading

Henry Dannenberg () and Wilfried Ehrenfeld

No 4/2010, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: Since the introduction of the European CO2 emissions trading system (EU ETS), the development of CO2 allowance prices is a new risk factor for enterprises taking part in this system. In this paper, we analyze how risk emerging from emissions trading can be considered in the stochastic profit and loss planning of corporations. Therefore we explore which planned figures are affected by emissions trading. Moreover, we show a way to model these positions in a planned profit and loss account accounting for uncertainties and dependencies. Consequently, this model provides a basis for risk assessment and investment decisions in the uncertain environment of CO2 emissions trading.

Keywords: CO2; emissions trading; EU ETS; risk; stochastic business planning; CO2; Emissionshandel; EU ETS; Risiko; stochastische Unternehmensplanung (search for similar items in EconPapers)
JEL-codes: D81 G32 L59 Q54 Q56 Q58 (search for similar items in EconPapers)
Date: 2010
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