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Emissions trading with changing future commitments — some initial thoughts

In: Emissions Trading and Business

Author

Listed:
  • Marcus Stronzik

    (Scientific Institute for Infrastructure and Communications Services (WIK))

Abstract

In climate policy a shift from traditional command and control regulations to more market-oriented approaches such as emissions trading can be observed. Concerning the European context, the Directive for a European-wide emissions trading regime that started in 2005 is currently one of the major topics in European climate policy debates. We used contingent claims analysis in order to shed some light on the investment behaviour of companies covered by the EU Directive. Two different approaches to design an allocation free of charge were looked at: grandfathering without updating the base year and a rolling base year. It is shown that in the first case a considerable option value exists, whereas in the second case the option will more or less expire worthless.

Suggested Citation

  • Marcus Stronzik, 2006. "Emissions trading with changing future commitments — some initial thoughts," Springer Books, in: Ralf Antes & Bernd Hansjürgens & Peter Letmathe (ed.), Emissions Trading and Business, pages 177-186, Springer.
    • Handle: RePEc:spr:sprchp:978-3-7908-1748-5_13
    DOI: 10.1007/3-7908-1748-1_13
    as

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