Risk aversion and CO2 regulatory uncertainty in power generation investment: Policy and modeling implications
AbstractWe consider a simulation of risk-averse producers when making investment decisions in a competitive energy market, who face uncertainty about future regulation of carbon dioxide emissions. Investments are made under regulatory uncertainty; then the regulatory state is revealed and producers realize returns. We consider anticipated taxes, grandfathered permits and auctioned permits and show that some anticipated policies increase investment in the relatively dirty technology. Beliefs about the policy instrument that will be used to price carbon may be as important as certainty that carbon will be priced. More generally, a failure to consider risk aversion may bias policy analysis for the power sector.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 60 (2010)
Issue (Month): 3 (November)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622870
Electric power Risk aversion Emissions markets Climate policy;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Guy Meunier, 2014.
"Risk Aversion and Technology Portfolios,"
Review of Industrial Organization, Springer,
Springer, vol. 44(4), pages 347-365, June.
- van der Weijde, Adriaan Hendrik & Hobbs, Benjamin F., 2012. "The economics of planning electricity transmission to accommodate renewables: Using two-stage optimisation to evaluate flexibility and the cost of disregarding uncertainty," Energy Economics, Elsevier, Elsevier, vol. 34(6), pages 2089-2101.
- Pierre-André Jouvet & Frédéric Lantz & Elodie Le Cadre, 2011.
"The bioenergies development: the role of biofuels and the CO2 price,"
Working Papers, INRA, Economie Publique
2011/02, INRA, Economie Publique.
- Pierre-Andre Jouvet & Frederic Lantz & Elodie Le Cadre, 2012. "The bioenergies development: the role of biofuels and the CO2 price," Working Papers, Chaire Economie du Climat 1201, Chaire Economie du Climat.
- Guy MEUNIER, 2013.
"Risk aversion and technology mix in an electricity market,"
Working Papers, Institut National de la Recherche Agronomique, France
221660, Institut National de la Recherche Agronomique, France.
- Meunier, Guy, 2013. "Risk aversion and technology mix in an electricity market," Energy Economics, Elsevier, Elsevier, vol. 40(C), pages 866-874.
- Guy Meunier, 2013. "Risk aversion and technology mix in an electricity market," Working Papers, HAL hal-00906944, HAL.
- Sunderkötter, Malte & Weber, Christoph, 2012. "Valuing fuel diversification in power generation capacity planning," Energy Economics, Elsevier, Elsevier, vol. 34(5), pages 1664-1674.
- Pahle, Michael & Fan, Lin & Schill, Wolf-Peter, 2011.
"How emission certificate allocations distort fossil investments: The German example,"
Energy Policy, Elsevier,
Elsevier, vol. 39(4), pages 1975-1987, April.
- Michael Pahle & Lin Fan & Wolf-Peter Schill, 2011. "How Emission Certificate Allocations Distort Fossil Investments: The German Example," Discussion Papers of DIW Berlin, DIW Berlin, German Institute for Economic Research 1097, DIW Berlin, German Institute for Economic Research.
- Fan, Lin & Norman, Catherine S. & Patt, Anthony G., 2012. "Electricity capacity investment under risk aversion: A case study of coal, gas, and concentrated solar power," Energy Economics, Elsevier, Elsevier, vol. 34(1), pages 54-61.
- Donatella Baiardi & Matteo Manera & Mario Menegatti, 2014.
"The Effects of Environmental Risk on Consumption: an Empirical Analysis on the Mediterranean Countries,"
Working Papers, Fondazione Eni Enrico Mattei
2014.43, Fondazione Eni Enrico Mattei.
- Donatella Baiardi & Matteo Manera & Mario Menegatti, 2014. "The Effects of Environmental Risk on Consumption: an Empirical Analysis on the Mediterranean Countries," Working Papers, University of Milano-Bicocca, Department of Economics 271, University of Milano-Bicocca, Department of Economics, revised Apr 2014.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.