Abstract
This paper outlines a model approach for the financial valuation of future power generation technologies, such as nuclear fusion or carbon capture and storage (CCS) under an emissions trading regime. Since on imperfect markets, interdependencies between decisions inhibit the isolated valuation of an investment, we use simultaneous calculation of optimal production, sales and investment programs; these are subject to the constraints and conditions characteristic for investments in low- and zero-carbon technologies such as fusion and CCS. Duality theory allows to derive, identify and economically interpret the determinants for the price ceiling as (corrected) net present values. Sensitivity analysis shows how changes in the technical specification or environmental policies affect the maximum payable price. Particularly, tradable permits have several effects on low-carbon investments and do not always encourage CO 2 abatement. While a zero-emissions technology like fusion always profits from a tightened emissions trading scheme, for low-carbon technology like CCS—in particular cases—this may even be counterproductive from an economic as well as an environmental point of view.
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This paper was submitted as one of many contributions on environmental management at the EURO XXIII conference hosted by the University of Siegen. The editorial work was done by Peter Letmathe (University of Siegen), Axel Tuma (University of Augsburg) and Gerhard-Wilhelm Weber (METU Ankara).
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Klingelhöfer, H.E., Kurz, P. Financial valuation of investments in future power generation technologies: nuclear fusion and CCS in an emissions trading system. Cent Eur J Oper Res 19, 415–438 (2011). https://doi.org/10.1007/s10100-011-0193-8
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DOI: https://doi.org/10.1007/s10100-011-0193-8