Innovation and risk-averse firms: Options on carbon allowances as a hedging tool

Energy Policy

Volumn 70, Issue , 2014, Pages 227-235

  Szolgayová, Jana ^a,c   Golub, Alexander ^b   Fuss, Sabine ^a,d  

^a INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS   (Austria)

^b AMERICAN UNIVERSITY   (United States)

^c Physics and Informatics   (Slovakia)

^d MERCATOR RESEARCH INSTITUTE ON GLOBAL COMMONS AND CLIMATE CHANGE   (Germany)

Author keywords

Carbon trading scheme; Option pricing; Stochastic technological change

Indexed keywords

CARBON DIOXIDE; COSTS; DEFORESTATION; ECONOMICS; EMISSION CONTROL; INDUSTRY; RISK ANALYSIS; STOCHASTIC SYSTEMS;

CARBON ALLOWANCES; CARBON MITIGATION; CARBON TRADING; OPTION PRICING; REAL OPTIONS APPROACH; RISK REDUCTIONS; TECHNOLOGICAL CHANGE; TECHNOLOGY COSTS; OPTIMAL PORTFOLIOS;

CARBON; FINANCIAL MARKETS;

CARBON DIOXIDE; CARBON EMISSION; DEFORESTATION; DEGRADATION; EMISSION CONTROL; EMISSIONS TRADING; ENVIRONMENTAL ECONOMICS; INDUSTRIAL ENTERPRISE; INNOVATION; PRICING POLICY; RESEARCH AND DEVELOPMENT; STOCHASTICITY; TECHNOLOGICAL CHANGE; GOVERNANCE APPROACH; PLANNING THEORY; POLICY MAKING; POLLUTION TAX; RISK ASSESSMENT; THEORETICAL STUDY;

EID: 84899994735     PISSN: 03014215     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.enpol.2014.03.012     Document Type: Article

References (30)

1. Bosetti, V., Lubowski, R., Golub, A., A. Markandya, 2009. Linking Reduced Deforestation and a Global Carbon Market: Impacts on Costs, Financial Flows, and Technological Innovation. BC3 Working Paper series 2009-01, June 2009.
2. Bosetti V., Tavoni M. Uncertain R&D, backstop technology and GHGs stabilization. Energy Econ. 2009, 31:18-26.
3. 2 emission reductions, geographical exibility and concrete ceilings: an assessment using the POLES model. Energy Policy 1999, 27:585-601.
4. Davis G., Owens B. Optimizing the level of renewable electric R&D expenditures using real options analysis. Energy Policy 2003, 31:1589-1608.
5. Dechezleprêtre, A., Glachant, M., Hascic, I., Johnstone, N., Y. Ménière, 2009. Invention and Transfer of Climate Change Mitigation Technologies on a Global Scale: A Study Drawing on Patent Data. Report for AFD (French Development Agency), Paris. Available at: http://personal.lse.ac.uk/dechezle/Innovation_diffusion_climate_techs_AFD.pdf.
6. Dechezleprêtre A., Glachant M., Hascic I., Johnstone N., Ménière Y. Invention and transfer of climate change mitigation technologies: a global analysis. Rev. Environ. Econ. Policy 2011, 5(1):109-130.
7. Dixit A.K., Pindyck R.S. Investment Under Uncertainty 1994, Princeton University Press, Princeton.
8. Dixit, A.K., Pindyck R.S., 1995. The New Option View of Investment. Working Papers 3794-95. MIT, Sloan School of Management.
9. Ellerman, D.A., Decaux A., 1998. Analysis of Post-Kyoto CO2 Emission Trading Using Marginal Abatement Curves. Report 40. Massachusetts Institute of Technology - Joint Program on the Science and Policy of Global Change.
10. Fuss S., Szolgayová J., Golub A., Obersteiner, M.M. Options on low-cost abatement and investment in the energy sector: new perspectives on REDD. Environ. Dev. Econ. 2011, 16(4):507-525.
11. Gillingham K., Newell R.G., Pizer W.A. Modeling endogenous technological change for climate policy analysis. Energy Econ. 2008, 30:2734-2753.
12. Golub A. Options on REDD as a hedging tool for post-Kyoto climate policy. Deforestation and Climate Change: Reducing Carbon Emissions from Deforestation and Forest Degradation 2010, 165-176. Edward Elgar, Cheltenham. V. Bosetti, R. Lubowski (Eds.).
13. Golub A., Dudek D., Strukova E. Risk-averse firms and new technologies. Modeling Environment - Improving Technological Innovations under Uncertainty. Routledge Explorations in Environmental Economics 2009, Routledge, Oxon/New York. first ed. A. Golub, A. Markandya (Eds.).
14. 2 abatement in the presence of induced technological change. J. Environ. Econ. Manag. 2000, 39(1):1-38.
15. Luehrman T. Strategy as a portfolio of real options. Real Options and Investment Under Uncertainty: Classical Readings and Recent Contributions 2004, MIT Press, Cambridge/Massachusetts. E.S. Schwartz, L. Trigeorgis (Eds.).
16. McKitrick R. A derivation of the marginal abatement cost curve. J. Environ. Econ. Manag. 1999, 37:306-314.
17. Organisation for Economic Co-operation and Development, 2014. Benefits of Climate Change. At: (accessed online 14.01.14). http://www.oecd.org/fr/env/cc/benefitsofclimatechangepolicies.htm.
18. Pindyck R.S. Investment of uncertain cost. J. Financ. Econ. 1993, 34(1):53-76.
19. Popp D. ENTICE: endogenous technological change in the DICE model of global warming. J. Environ. Econ. Manag. 2004, 48:742-768.
20. Popp D. Modelling technological change in climate policy analyses. Energy Econ. 2006, 28:596-609.
21. Reinelt P.S., Keith R. Carbon capture retrofits and the cost of regulatory uncertainty. Energy J. 2007, 28(4):101-128.
22. Riahi K., Grübler A., Nakicenovic N. Scenarios of longterm socio-economic and environmental development under climate stabilization. Technol. Forecast. Soc. 2007, 74:887-935.
23. Schwartz E.S. Patents and R&D as real options. Econ. Lett. 2004, 33(1):23-54.
24. Schwartz E.S., Trigeorgis L. Real Options and Investment Under Uncertainty: Classical Readings and Recent Contributions 2004, MIT Press, Cambridge, MA.
25. Siddiqui A., Fleten S.-E. How to proceed with competing alternative energy technologies: a real options analysis. Energy Econ. 2010, 32:817-830.
26. Sue-Wing I. Representing induced technological change in models for climate policy analysis. Energy Econ. 2006, 28:539-562.
27. 2 price caps on electricity investments - a real options analysis. Energy Policy 2008, 26(10):3974-3981.
28. Taylor R. (Ed.), 2011. Chapter 1: Forests for a Living Planet. WWF Living Forests Report. Gland, World Wide Fund for Nature, p. 35.
29. van den Broek M., Faaij A., Turkenburg W. Planning for an electricity sector with carbon capture and storage. Int J Greenhouse Gas Control 2008, 2(1):105-129.
30. Weyant J.P. The cost of the Kyoto Protocol - a multi-model evaluation. Energy J. 1999, 20(Special Issue):1-398.