IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/129304.html

The Offtake-Commitment Mechanism: Sigma-Channel Identification via Cross-Sectoral Heterogeneity in Clean-Hydrogen Investment

Author

Listed:
  • Saakstra, Sake

Abstract

Pre-financial-investment-decision (pre-FID) offtake commitments in clean-hydrogen projects reduce the cumulative cancellation probability by 11.3 to 13.2 percentage points across five convergent matching estimators (IPWRA, OLS-adjusted, regression-adjusted matching, doubly-robust IPTW, naive IPW), using a project-level panel of 1,354 announced developments from the S&P Global Hydrogen Project Database (2010-2026). The estimate is exceptionally robust to unobserved-confounder bias: the Oster delta_null = 20.23 implies that for unobservables to explain the effect, they would need to be twenty times more influential than the maximally-included set of observable controls. This is the largest and most identification-secure treatment effect in the related dissertation work. The substantive interpretation invokes the sigma-channel of the real-options framework: offtake commitments reduce revenue volatility and counterparty risk simultaneously. The sigma-channel comparative statics predict that revenue-volatility-reducing instruments should produce larger effects in high-volatility sectors than in low-volatility sectors. We test this prediction directly via cross-sectoral heterogeneity: the offtake-commitment ATT is concentrated in power and heat (-0.30 pp) and transport (-0.27 pp), and substantially smaller or null in chemical (-0.04 pp) and refinery (-0.02 pp). The pattern matches the sigma-channel prediction in sign and approximate magnitude, providing direct mechanism-identifying empirical evidence that complements the average-treatment-effect identification. The methodological contribution is a cross-sectoral heterogeneity test as a direct mechanism-identifying strategy, supplementing the conventional partial-identification sensitivity analysis (Oster bounds). The policy implication is that capex-grant programmes such as the EU Innovation Fund should incorporate demonstrable pre-FID offtake-commitment eligibility requirements, jointly addressing the financing-constraint friction (the Innovation Fund's current target) and the counterparty-risk friction (the Innovation Fund currently leaves unaddressed).

Suggested Citation

  • Saakstra, Sake, 2026. "The Offtake-Commitment Mechanism: Sigma-Channel Identification via Cross-Sectoral Heterogeneity in Clean-Hydrogen Investment," MPRA Paper 129304, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:129304
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/129304/1/MPRA_paper_129304.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Olijslagers, Stan & van der Ploeg, Frederick & van Wijnbergen, Sweder, 2023. "On current and future carbon prices in a risky world," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    2. Emily Oster, 2019. "Unobservable Selection and Coefficient Stability: Theory and Evidence," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(2), pages 187-204, April.
    3. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    4. Francisco Blasques & Paolo Gorgi & Siem Jan Koopman & Noah Stegehuis, 2024. "Mitigating Estimation Risk: a Data-Driven Fusion of Experimental and Observational Data," Tinbergen Institute Discussion Papers 24-066/III, Tinbergen Institute.
    5. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-1148, September.
    6. Fuss, Sabine & Szolgayová, Jana & Khabarov, Nikolay & Obersteiner, Michael, 2012. "Renewables and climate change mitigation: Irreversible energy investment under uncertainty and portfolio effects," Energy Policy, Elsevier, vol. 40(C), pages 59-68.
    7. Barradale, Merrill Jones, 2014. "Investment under uncertain climate policy: A practitioners׳ perspective on carbon risk," Energy Policy, Elsevier, vol. 69(C), pages 520-535.
    8. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474, December.
    9. Adrian Odenweller & Falko Ueckerdt, 2025. "The green hydrogen ambition and implementation gap," Nature Energy, Nature, vol. 10(1), pages 110-123, January.
    10. Andrew B. Abel & Avinash K. Dixit & Janice C. Eberly & Robert S. Pindyck, 1996. "Options, the Value of Capital, and Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 753-777.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Romano, Teresa & Fumagalli, Elena, 2018. "Greening the power generation sector: Understanding the role of uncertainty," Renewable and Sustainable Energy Reviews, Elsevier, vol. 91(C), pages 272-286.
    2. John P. Small & Henry Ergas, 1999. "The Rental Cost of Sunk and Regulated Capital," Econometrics Working Papers 9908, Department of Economics, University of Victoria.
    3. Hjalmar Böhm & Michael Funke & Nikolaus A. Siegfried, 1999. "Discovering the Link between Uncertainty and Investment - Microeconometric Evidence from Germany," Quantitative Macroeconomics Working Papers 19906, Hamburg University, Department of Economics.
    4. Goel, Rajeev K. & Ram, Rati, 2001. "Irreversibility of R&D investment and the adverse effect of uncertainty: Evidence from the OECD countries," Economics Letters, Elsevier, vol. 71(2), pages 287-291, May.
    5. Gabriel P. Mathy, 2020. "How much did uncertainty shocks matter in the Great Depression?," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(2), pages 283-323, May.
    6. Marcel Boyer & Pierre Lasserre & Michel Moreaux, 1998. "Emerging environmental problems, irreversible remedies, and myopia in a two country setup," Revue d'Économie Industrielle, Programme National Persée, vol. 83(1), pages 47-61.
    7. Luis Alvarez, 2010. "Irreversible capital accumulation under interest rate uncertainty," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 72(2), pages 249-271, October.
    8. Lin, Yongjia & Fu, Xiaoqing & Fu, Xiaolan, 2021. "Varieties in state capitalism and corporate innovation: Evidence from an emerging economy," Journal of Corporate Finance, Elsevier, vol. 67(C).
    9. repec:dau:papers:123456789/1046 is not listed on IDEAS
    10. Sels, A.T.H., 2006. "Foreign direct investment as an entry mode. An application in emerging economies," Other publications TiSEM 583ca9b5-1691-425d-8f77-0, Tilburg University, School of Economics and Management.
    11. Alonso-Conde, Ana Belen & Brown, Christine & Rojo-Suarez, Javier, 2007. "Public private partnerships: Incentives, risk transfer and real options," Review of Financial Economics, Elsevier, vol. 16(4), pages 335-349.
    12. John A. List & Michael S. Haigh, 2010. "Investment Under Uncertainty: Testing the Options Model with Professional Traders," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 974-984, November.
    13. Seong-Hoon Cho & Jaimin Lee, 2021. "Estimating the uncertainty–R&D investment relationship and its interactions with firm size," Small Business Economics, Springer, vol. 57(3), pages 1243-1267, October.
    14. Rosella Levaggi & Moretto Michele, 2008. "Investment In Hospital Care Technology Under Different Purchasing Rules: A Real Option Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 60(2), pages 159-181, April.
    15. Alvarez, Luis H.R., 2011. "Optimal capital accumulation under price uncertainty and costly reversibility," Journal of Economic Dynamics and Control, Elsevier, vol. 35(10), pages 1769-1788, October.
    16. Shibata, Takashi & Wong, Kit Pong, 2019. "Investment under uncertainty with variable costly reversibility," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 14-28.
    17. Seo, Sangtaek & Segarra, Eduardo & Mitchell, Paul D. & Leatham, David J., 2006. "Irrigation Technology Adoption in the Texas High Plains: A Real Options Approach," 2006 Annual meeting, July 23-26, Long Beach, CA 21427, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Vo, Lai Van & Le, Huong Thi Thu, 2017. "Strategic growth option, uncertainty, and R&D investment," International Review of Financial Analysis, Elsevier, vol. 51(C), pages 16-24.
    19. Luis H.R. Alvarez E., 2006. "Irreversible Investment, Incremental Capital Accumulation, and Price Uncertainty," Discussion Papers 4, Aboa Centre for Economics.
    20. Saakstra, Sake, 2026. "A Time-Varying-Parameter State-Space Approach to Sparse-Event Survival Modelling: Methodological Design, Out-of-Sample Performance, and Application to Hydrogen Project Implementation-Risk," MPRA Paper 129308, University Library of Munich, Germany.
    21. Zhang, Anzhou, 2024. "Capacity, volume flexibility, and costs," International Journal of Industrial Organization, Elsevier, vol. 97(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:129304. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.