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Stochastic Income Statement Planning and Emissions Trading

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  • Dannenberg, Henry
  • Ehrenfeld, Wilfried

Abstract

Since the introduction of the European CO2 emissions trading system (EU ETS), the development of CO2 allowance prices is a new risk factor for enterprises taking part in this system. In this paper, we analyze how risk emerging from emissions trading can be considered in the stochastic profit and loss planning of corporations. Therefore we explore which planned figures are affected by emissions trading. Moreover, we show a way to model these positions in a planned profit and loss account accounting for uncertainties and dependencies. Consequently, this model provides a basis for risk assessment and investment decisions in the uncertain environment of CO2 emissions trading.

Suggested Citation

  • Dannenberg, Henry & Ehrenfeld, Wilfried, 2010. "Stochastic Income Statement Planning and Emissions Trading," IWH Discussion Papers 4/2010, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:iwh-4-10
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    References listed on IDEAS

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    Cited by:

    1. Ehrenfeld, Wilfried, 2012. "Klimawandel und betriebliche Innovationsprozesse," IWH Discussion Papers 13/2012, Halle Institute for Economic Research (IWH).

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    More about this item

    Keywords

    CO2; emissions trading; EU ETS; risk; stochastic business planning; CO2; Emissionshandel; EU ETS; Risiko; stochastische Unternehmensplanung;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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