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The effect of environmental policies on risk reductions in energy generation

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  • Acevedo, Giancarlo
  • Bernales, Alejandro
  • Flores, Andrés
  • Inzunza, Andrés
  • Moreno, Rodrigo

Abstract

We demonstrate that environmental policies can decrease the risks in energy generation for private investors when several renewable technologies are simultaneously triggered. This is because diverse renewable technologies can hedge the intermittent generation of other forms of renewable power. Our study is distinct from previous literature, which has not examined environmental policies through a risk-reduction analysis, or has only considered a few technologies—such as wind and solar—when analyzing risk-reduction benefits. This paper is important, as environmental policies can be justified not only due to environmental benefits, but also economically from a risk-reduction perspective by using basic diversification gains.

Suggested Citation

  • Acevedo, Giancarlo & Bernales, Alejandro & Flores, Andrés & Inzunza, Andrés & Moreno, Rodrigo, 2021. "The effect of environmental policies on risk reductions in energy generation," Journal of Economic Dynamics and Control, Elsevier, vol. 126(C).
  • Handle: RePEc:eee:dyncon:v:126:y:2021:i:c:s0165188920301950
    DOI: 10.1016/j.jedc.2020.104027
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    2. Chishti, Muhammad Zubair & Dogan, Eyup & Zaman, Umer, 2023. "Effects of the circular economy, environmental policy, energy transition, and geopolitical risk on sustainable electricity generation," Utilities Policy, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    Environmental policy; Risk reduction; Energy generation; Optimal expansion planning; Renewable generation;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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