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Financing renewable energy infrastructure: Formulation, pricing and impact of a carbon revenue bond

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Author Info

  • Tang, Amy
  • Chiara, Nicola
  • Taylor, John E.
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    Abstract

    Renewable energy systems depend on large financial incentives to compete with conventional generation methods. Market-based incentives, including state-level REC markets and international carbon markets have been proposed as solutions to increase renewable energy investment. In this paper we introduce and formulate a carbon revenue bond, a financing tool to complement environmental credit markets to encourage renewable energy investment. To illustrate its use, we value the bond by predicting future revenue using stochastic processes after analyzing historical price data. Three illustrative examples are presented for renewable energy development in three different markets: Europe, Australia and New Jersey. Our findings reveal that the sale of a carbon revenue bond with a ten year maturity can finance a significant portion of a project's initial cost.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0301421512002273
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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 45 (2012)
    Issue (Month): C ()
    Pages: 691-703

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    Handle: RePEc:eee:enepol:v:45:y:2012:i:c:p:691-703

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    Web page: http://www.elsevier.com/locate/enpol

    Related research

    Keywords: Renewable energy financing; Revenue bond; Environmental credits;

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    Cited by:
    1. Shrimali, Gireesh & Nelson, David & Goel, Shobhit & Konda, Charith & Kumar, Raj, 2013. "Renewable deployment in India: Financing costs and implications for policy," Energy Policy, Elsevier, vol. 62(C), pages 28-43.
    2. Ming, Zeng & Ximei, Liu & Yulong, Li & Lilin, Peng, 2014. "Review of renewable energy investment and financing in China: Status, mode, issues and countermeasures," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 23-37.
    3. Osmani, Atif & Zhang, Jun, 2014. "Economic and environmental optimization of a large scale sustainable dual feedstock lignocellulosic-based bioethanol supply chain in a stochastic environment," Applied Energy, Elsevier, vol. 114(C), pages 572-587.

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