dc.contributor.author | Murto, Pauli | |
dc.contributor.author | Liski, Matti | |
dc.date.accessioned | 2010-05-11T15:45:12Z | |
dc.date.available | 2010-05-11T15:45:12Z | |
dc.date.issued | 2010-03 | |
dc.identifier.other | 2010-005 | |
dc.identifier.uri | http://hdl.handle.net/1721.1/54755 | |
dc.description.abstract | Energy costs are notoriously uncertain but what is the effect of this on energysaving investments? We find that real-option frictions imply a novel equilibrium response to increasing but uncertain energy costs: early investments are cautious but ultimately real-option frictions endogenously vanish, and the activity affected by higher energy costs fully recovers. We use electricity market data for counterfactual analysis of the real-option mark-ups and policy experiments. Uncertainty alone implies that the early compensation to new technologies exceeds entry costs by multiple factors, and that uncertainty-reducing subsidies to green energy can benefit the consumer side at the expense of the old capital rents, even in the absence of externalities from energy use. | en |
dc.description.sponsorship | Academy of Finland, Nordic Energy Research Program, and Yrj¨o Jahnsson
Foundation | en |
dc.language.iso | en_US | en |
dc.publisher | MIT Center for Energy and Environmental Research Policy | en |
dc.relation.ispartofseries | MIT-CEEPR (Series);10-005WP | |
dc.title | Uncertainty and Energy Saving Investments | en |
dc.type | Working Paper | en |