IDEAS home Printed from https://ideas.repec.org/a/taf/rsrexx/v2y2010i1p161-181.html
   My bibliography  Save this article

Uncertainty, Real Option Valuation, and Policies toward a Sustainable Built Environment

Author

Listed:
  • Emiel van der Maaten

Abstract

Real option value can severely hinder investments in energy conservation in real estate. This paper evaluates whether policy incentives to invest now, instead of tomorrow can be tailored to compensate for any option value to defer. A case study reviews a Dutch government subsidy program with the Cox, Ross, and Rubinstein (1979) binomial method. Based on market priced risk, the subsidy properly compensates investors for the real option value they forego by exercising the option and investing in a solar hot water system. A survey amongst homeowners reveals that private risks are an important part of the perceived uncertainty when investing in energy efficiency and should be included in the model. A practitioners' method is proposed that uses a binomial real option model to design policy incentives and surveys to assess the relevant uncertainties to include in the model. The results displayed in strategy spaces makes intuitive decisions possible.

Suggested Citation

  • Emiel van der Maaten, 2010. "Uncertainty, Real Option Valuation, and Policies toward a Sustainable Built Environment," Journal of Sustainable Real Estate, Taylor & Francis Journals, vol. 2(1), pages 161-181, January.
    • Handle: RePEc:taf:rsrexx:v:2:y:2010:i:1:p:161-181
    DOI: 10.1080/10835547.2010.12091812
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/10835547.2010.12091812
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10835547.2010.12091812?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    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:taf:rsrexx:v:2:y:2010:i:1:p:161-181. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rsre20 .

    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.