Effects of Low-Cost Offsets on Energy Investment - New Perspectives on REDD

摘要: Tropical deforestation is one of the major sources carbon emissions, but Kyoto Protocol presently excludes avoiding these specific emissions to fulfill stabilization targets. Since 13th Conference Parties (COP) UNFCCC in 2007, where need for policy incentives reduction from and degradation (REDD) was first officially recognized, focus this debate has shifted issues implementation methodology. One question how REDD would be financed, which could solved by integrating credits into existing markets. However, concern been voiced regarding effects that availability cheap might have on energy investments development clean technology. On other hand, investors producers are also worried trading schemes like installed Europe deter investment new technologies harm profits plants due fluctuations price permits. This paper seeks contribute discussion developing a real options model, there an option invest less carbon-intensive technology purchase REDD, you will exercise or not depending future evolution CO2 prices. In way, unresolved questions can still addressed at later stage, while hold maintain flexibility decisions. We find cleaner significantly affected if priced as derivative Indeed, helps smooth out arise permit thus decreases risk producer - thereby being complement rather than obstacle undermining cap-and-trade.