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A case study on risk and return implications of emissions trading in power generation investments

In: Emissions Trading

Author

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  • Harri Laurikka

    (Helsinki University of Technology)

Abstract

This paper explores quantitative implications of the European Union Emissions Trading Scheme (EU ETS) on power capacity investment appraisal in a deregulated market. Risk and return of three different types of power plants, a gas-fired condensing power plant; a hydro power plant with a reservoir; and an off-shore wind power farm, are studied and compared in the regulatory environment of Finland. A single-firm exogenous and stochastic price model is used to simulate possible market outcomes. The model runs suggest that emissions trading increases the expected return of all three power plant technologies. The increase in risk is significant only in the case of the gas-fired power plant.

Suggested Citation

  • Harri Laurikka, 2008. "A case study on risk and return implications of emissions trading in power generation investments," Springer Books, in: Ralf Antes & Bernd Hansjürgens & Peter Letmathe (ed.), Emissions Trading, pages 133-147, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-73653-2_9
    DOI: 10.1007/978-0-387-73653-2_9
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    Cited by:

    1. Wüstenhagen, Rolf & Menichetti, Emanuela, 2012. "Strategic choices for renewable energy investment: Conceptual framework and opportunities for further research," Energy Policy, Elsevier, vol. 40(C), pages 1-10.
    2. Pereira, Guillermo Ivan & Niesten, Eva & Pinkse, Jonatan, 2022. "Sustainable energy systems in the making: A study on business model adaptation in incumbent utilities," Technological Forecasting and Social Change, Elsevier, vol. 174(C).

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