Resource and Energy Economics | VOL. 41
Read

Energy intensive infrastructure investments with retrofits in continuous time: Effects of uncertainty on energy use and carbon emissions

Publication Date Aug 1, 2015

Abstract

Energy-intensive infrastructure may tie up fossil energy use and carbon emissions for a long time after investments, making the structure of such investments crucial for society. Much or most of the resulting carbon emissions can often be eliminated later, through a costly retrofit. This paper studies the simultaneous decision to invest in such infrastructure, and retrofit it later, in a model where future climate damages are uncertain and follow a geometric Brownian motion process with positive drift. It shows that greater uncertainty about climate cost (for given unconditional expected costs) then delays the retrofit decision by increasing the option value of waiting to invest. Higher energy intensity is also chosen for the initial infrastructure when uncertainty is greater. These decisions are efficient given that energy and carbon prices facing the decision maker are (globally) correct, but inefficient when they are lower, which is more typical. Greater uncertainty about future climate costs will then further increase lifetime carbon emissions from the infrastructure, related both to initial investments, and to too infrequent retrofits when this emissions level is already too high. An initially excessive climate gas emissions level is then likely to be worsened when volatility increases.

Concepts

Greater Uncertainty Fossil Energy Use Carbon Emissions Energy Carbon Emissions Higher Energy Intensity Energy Use Positive Drift Fossil Energy Energy Intensity Fossil Carbon Emissions

Round-ups are the summaries of handpicked papers around trending topics published every week. These would enable you to scan through a collection of papers and decide if the paper is relevant to you before actually investing time into reading it.

Coronavirus Research Articles published between Sep 26, 2022 to Oct 02, 2022

R DiscoveryOct 03, 2022
R DiscoveryArticles Included:  5

Introduction: Test solutions (Biotrue, renu Advanced [Bausch and Lomb], ACUVUE RevitaLens [Johnson and Johnson Vision], cleadew [Ophtecs corp.] or AOS...

Read More

Good health Research Articles published between Sep 26, 2022 to Oct 02, 2022

R DiscoveryOct 03, 2022
R DiscoveryArticles Included:  2

Patient and public involvement in health care is considered indispensable in the way we conduct daily pediatric neurology practice, and in the develop...

Read More

Quality Of Education Research Articles published between Sep 26, 2022 to Oct 02, 2022

R DiscoveryOct 03, 2022
R DiscoveryArticles Included:  5

Ingenta is not the publisher of the publication content on this website. The responsibility for the publication content rests with the publishers prov...

Read More

Gender Equality Research Articles published between Sep 26, 2022 to Oct 02, 2022

R DiscoveryOct 03, 2022
R DiscoveryArticles Included:  3

Introduction: As of early March 2022, the COVID-19 pandemic has killed more 5.9 million people worldwide, and infected more than 437 million.

Read More

Coronavirus Pandemic

You can also read COVID related content on R COVID-19

R ProductsCOVID-19

ONE PROBLEM . ONE PURPOSE . ONE PLACE

Creating the world’s largest AI-driven & human-curated collection of research, news, expert recommendations and educational resources on COVID-19

COVID-19 Dashboard

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on “as is” basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The Copyright Law.