Research on environmental uncertainty typically distinguishes between different sources of uncertainty according to the different environments that a company interacts with. The regulatory ...environment and associated uncertainties become especially important when investigating the subject of pollution reduction. Many researchers have started to investigate the effects of environmental regulation on innovation, however, only little is known about the role of regulatory uncertainty in this context. We provide a taxonomy of regulatory uncertainties by building on the Miles and Snow scale of environmental uncertainty. We apply this taxonomy to uncertainties in current climate policy and test it based on a survey among companies that are subject to the European Emission Trading Scheme (EU ETS), a flexible mechanism of the Kyoto-Protocol. Our results show that the EU ETS creates uncertainties in all categories of our taxonomy and suggest further research to better understand how different regulatory uncertainties affect companies’ business decisions.
From a slow start, the clean development mechanism (CDM) market has recently experienced enormous growth. However, the CDM market has been increasingly criticised, resulting in a lively debate about ...how to reform, complement, or replace it. In order to increase transparency and assist policy-makers in better understanding the current market, we depart from the traditional project-level perspective on CDM and analyse commercial activities by utilising data from UNEP Risoe's CDM Bazaar. To this end, we first establish a seven-step value chain by conducting a factor analysis on the commercial activities indicated in the Bazaar and, second, identify nine prevalent business models with a cluster analysis of all 495 participating organisations. Based on these analyses, we discuss potential impacts on the value chain of different policy scenarios that rely on carbon credits as incentive. We find that the importance of specific regulatory CDM know-how and general business activities such as finance varies strongly with the different policy scenarios. Our analysis serves to sensitise policy-makers and business about implications of different regulatory designs.
We propose a generic valuation framework for the appraisal of R&D projects based on real option theory. The added value of this approach is the presentation of a model that was implemented in a ...manner that allows corporate decision makers to use real options in an intuitive and standardized way. The project valuation procedure is separated into three main phases: project modeling, data and input collection, and result generation and analysis. The project model represents the structure of the real world R&D project with its investments, expected results, and decisions that need to be taken conditionally on the outcomes of research activities. The project model is represented in the form of a decision tree, where different research results or taken decisions lead to new branches. In this way, every possible situation the project can pass through can be represented. Uncertainties are separated into market uncertainties (e.g., market prices) and project specific, private uncertainties (e.g. uncertainty of research results). For both uncertainties, event trees are constructed which are then combined and merged with the above mentioned decision tree in order to represent the value evolution of the R&D project under given decisions and uncertainties. For every possible state of the project the real option value is calculated. By creating multidimensional trees, a multitude of decision steps and various kinds of real options (e.g., continue, expansion, switch, abandonment) can be modeled. The calculation complexity for the decision trees is given. From the tree structure we can calculate the real option value of starting an R&D project, i.e., the value of undertaking the first investment and thus acquiring the subsequent decision opportunities given by the completion of the first research effort. Furthermore, the optimal exercise strategy is derived from the decision tree. The exercise strategy gives the manager the possibility to have an a priori overview of where an R&D project may lead to, which decisions need to be taken in which circumstances, and when the project needs to be stopped in order not to generate losses. In an in‐depth case study we use an illustrative R&D project to set up and discuss the three phases of project modeling in the real options framework: building the multidimensional decision tree, input generation, and calculation of the real option value as well as the optimal strategy for the R&D project.
Solar power technologies will have to become a major pillar in the world's future energy system to combat climate change and resource depletion. However, it is unclear which solar technology is and ...will prove most viable. Therefore, a comprehensive comparative assessment of solar technologies along the key quantitative and qualitative competitiveness criteria is needed. Based on a literature review and detailed techno-economic modeling for 2010 and 2020 in five locations, we provide such an assessment for the three currently leading large-scale solar technologies. We show that today these technologies cannot yet compete with conventional forms of power generation but approach competitiveness around 2020 in favorable locations. Furthermore, from a global perspective we find that none of the solar technologies emerges as a clear winner and that cost of storing energy differs by technology and can change the order of competitiveness in some instances. Importantly, the competitiveness of the different technologies varies considerably across locations due to differences in, e.g., solar resource and discount rates. Based on this analysis, we discuss policy implications with regard to fostering the diffusion of solar technologies while increasing the efficiency of policy support through an adequate geographical allocation of solar technologies.
While many different greenhouse gas (GHG) mitigation technologies can be implemented under the Clean Development Mechanism (CDM), renewable energy technologies (RETs), in particular, are often viewed ...as one of the key solutions for achieving the CDM's goals: host-country sustainable development and cost-efficient emissions reductions. However, the viability of emission reduction projects like RETs is technology- and country-specific. To improve the CDM with respect to the diffusion of RETs, it is crucial to understand the factors that ultimately drive or hinder investments in these technologies. This study develops a methodology based on project-level, regional and global variables that can systematically assess the financial and environmental performance of CDM projects in different country contexts. We quantitatively show how six RETs (PV, wind, hydro, biomass, sewage, landfill) are impacted differently by the CDM and how this impact depends on regional conditions. While sewage and landfill are strongly affected independently of their location; wind, hydro and biomass projects experience small to medium impacts through the carbon price, and strongly depend on regional conditions. PV depends more on regional conditions than on the carbon price but is always unprofitable. Furthermore, we determine the carbon prices necessary to push these six RETs to profitability under various regional conditions. Based on these results, we derive policy recommendations to advance the interplay between international and domestic climate policy to further incentivize GHG emission reductions from RETs.
Navigating the global carbon market Schneider, Malte; Hendrichs, Holger; Hoffmann, Volker H.
Energy policy,
2010, 2010-01-00, 20100101, Letnik:
38, Številka:
1
Journal Article
Recenzirano
From a slow start, the clean development mechanism (CDM) market has recently experienced enormous growth. However, the CDM market has been increasingly criticised, resulting in a lively debate about ...how to reform, complement, or replace it. In order to increase transparency and assist policy-makers in better understanding the current market, we depart from the traditional project-level perspective on CDM and analyse commercial activities by utilising data from UNEP Risoe's CDM Bazaar. To this end, we first establish a seven-step value chain by conducting a factor analysis on the commercial activities indicated in the Bazaar and, second, identify nine prevalent business models with a cluster analysis of all 495 participating organisations. Based on these analyses, we discuss potential impacts on the value chain of different policy scenarios that rely on carbon credits as incentive. We find that the importance of specific regulatory CDM know-how and general business activities such as finance varies strongly with the different policy scenarios. Our analysis serves to sensitise policy-makers and business about implications of different regulatory designs.
In the context of a rapidly evolving Clean Development Mechanism (CDM) market and increasing debate about the design of a future global climate regime, it is essential to understand which types of ...projects are undertaken along industrial value chains, and also the influence of company characteristics (e.g. size, raw material base, product type, ownership and location) on firms' CDM participation and choice of project type. The Indian pulp and paper industry was examined for its energy intensity and its diversity in terms of both mitigation opportunities and company characteristics. Large firms were found to be more likely than small firms to participate in CDM. Although CDM projects in large and small firms generate similar amounts of certified emission reductions (CERs), the type of technology implemented in those projects varies strongly with company size due to differing levels of capabilities and capital. Mill size and raw material base also affect participation and choice of project type. A structured approach is suggested for analysing how to engage different subsectors of an industry in mitigation efforts based on transnational sectoral approaches, domestic sectoral approaches, and programmatic CDM. Preliminary policy recommendations are offered for the Indian pulp and paper industry, as well as insights that are transferable to other countries. A one-size-fits-all sectoral approach is difficult to implement and a strategy for differentiated treatment based on company characteristics is required to reflect local development priorities.
This paper provides a comprehensive analysis of how the European Emission Trading System (EU ETS) as the core climate policy instrument of the European Union has impacted innovation. Towards this ...end, we investigate the impact of the EU ETS on research, development, and demonstration (RD&D), adoption, and organizational change. In doing so, we pay particular attention to the rela-tive influences of context factors (policy mix, market factors, public acceptance) as well as firm characteristics (value chain position, technology portfolio, size, vision). Empirically, our analysis is based on multiple case studies with 19 power generators, technology providers, and project developers in the German power sector which we conducted from June 2008 until June 2009. We find that the innovation impact of the EU ETS has remained limited so far because of the scheme’s initial lack in stringency and predictability and the relatively greater importance of context factors. Additionally, the impact varies tremendously across technologies, firms, and innovation dimensions, and is most pronounced for RD&D on carbon capture technologies and corporate procedural change. Our analysis suggests that the EU ETS by itself may not provide sufficient incentives for fundamental changes in corporate climate innovation activities at a level adequate for reaching political long-term targets. Based on the study’s findings, we derive a set of policy and research recommendations.
