Seminars & webinars
25 June 2013

Policy Uncertainty and Investment in Low-Carbon Technology


Where: Milan
Location:

Fondazione Eni Enrico Mattei
Corso Magenta 63
20123 Milan

***
Video-conference
at FEEM Venice

How to reach: Google map
Event's Timetable:


h. 12.00 Seminar

Information:

Seminars Office, seminars@feem.it

Speaker:

Hélia Costa, European University Institute

Abstract

Authors: Silvia Albrizio, Hélia Costa

In the context of an emission trading scheme, we study how uncertainty over the environmental policy affects firms' investment in low-carbon technologies. We develop a three period sequential model that combines the industry and the electricity sectors and encompasses both irreversible and reversible investment possibilities for the firms. Additionally, we explicitly model the policy uncertainty in the regulator's objective function as well as the market interactions that give rise to an endogenous price of permits.
We find that uncertainty reduces irreversible investment and that the availability of both reversible and irreversible technologies partially eliminates the positive effect of policy uncertainty on reversible technology found in previous literature. Furthermore, we provide a framework that allows to assess the efficiency of different implementations of such a scheme.

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Policy Uncertainty and Investment in Low-Carbon Technology (presentation)
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Policy Uncertainty and Investment in Low-Carbon Technology (paper)

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