using real option analysis for highly uncertain technology investments the case of wind energy technology this study examines the feasibility of using a theoretical model and empirical analysis methods to value renewable energy re investment from perspective of real option analysis roa based on use of a roa approach the re value is evaluated with respect to its ability to conform to the main sensitivity analysis of re investment as well as an empirical method devised to value re investment by using actual data the economic intuitiveness underlying the decision making process for re investment is elucidated while empirical analysis is performed to demonstrate the effectiveness of the options value embedded in current development planning in taiwan for wind energy in addition to revealing the advantages of re development when considering real option analytical results indicate that roa is a highly effective means of quantifying how investment planning uncertainty including managerial flexibility influences re development besides evaluating the value of current re investment this study demonstrates that results of the theoretical model empirical analysis and sensitivity analysis correlate well with each other restated the value of developing re increases when increasing the underlying price time to maturity risk free rate and volatility conversely the value of developing re decreases when increasing the exercise price

paternalism and the credbility problem in a centrally planned economy abstract the paper utilizes an infinitely repeated game framework with complete information and common knowledge assumption to illustrate the concepts of credibility paternalism storming kornai s soft budget constraint and pripiska

workforce education and technical change bias in u s agriculture and related industries the number of hours devoted to value added output in the north american industry classification system naics sector agriculture forestry fishing and hunting is increasingly supplied by individuals with advanced schooling consistent with hypotheses of a positive relationship among technology development adoption and dissemination and a more highly skilled workforce we first test and then conclude that the composition of the workforce is closely aligned with measures of the state of technology consistent with many other studies technical change has been labor saving overall yet technologies adopted have reduced both the absolute and relative numbers of workers not progressing beyond high school the changing composition of the workforce and technical change have driven an average wedge of 31 between reported wages and wages augmented by our estimates of the state of technology this gap was greater in the period prior to the mid 1980s when many of the changes in the education levels of the labor force occurred using estimates from the entire 1947 2010 period the quantity of work provided by the worker hired in 2010 was 31 greater than if no change in labor composition had occurred

induced innovation evolutionary theory and path dependence sources of technical change the i960s to the i98os were very productive of new theory and empirical insights into the sources of technical change in the i96os and i970s major attention focused on the implications of changes in demand and relative factor prices on the rate and direction of technical change in the late i 970s and early i980s attention shifted to evolutionary models inspired by a revival of interest in schumpeter s insights into the process of economic development since the early i98os these have been complemented by the development of historically grounded path dependent models of technical change each of these models has contributed substantial insight into the sources of technical change this paper was motivated by a perception that each of the three research agendas is approaching a dead end the three models induced evolutionary and path dependent represent elements of a more general theory that has not yet been invented ruttan 1996 a in a closing comment i suggest some steps toward the development of a more general theory of the sources of technical change

strategic behavior and the problem of storming in a centrally planned economy abstract it is shown that if the common knowledge assumption is properly utilized then it is possible to dispose of some unnecessary restrictions on the game theoretic account of storming presented by alexeev

carbon capture and storage as a corporate technology strategy challenge latest estimates suggest that widespread deployment of carbon capture and storage ccs could account for up to one fifth of the needed global reduction in co2 emissions by 2050 governments are attempting to stimulate investments in ccs technology both directly through subsidizing demonstration projects and indirectly through developing price incentives in carbon markets yet corporate decision makers are finding ccs investments challenging common explanations for delay in corporate ccs investments include operational concerns such as the high cost of capture technologies technological uncertainties in integrated ccs systems and underdeveloped regulatory and liability regimes in this paper we place corporate ccs adoption decisions within a technology strategy perspective we diagnose four underlying characteristics of the strategic ccs technology adoption decision that present unusual challenges for decision makers such investments are precautionary sustaining cumulative and situated understanding ccs as a corporate technology strategy challenge can help us move beyond the usual list of operational barriers to ccs and make public policy recommendations to help overcome them

environmental regulation with technology adoption learning and strategic behavior we analyze a model of environmental regulation with learning about environmental damages and endogenous choice of emissions abatement technology by a polluting firm we compare environmental policy under discretion in which policy is updated upon learning new information versus under rules in which policy is not updated when investment in abatement technology is made prior to the resolution of uncertainty neither discretion nor rules with either taxes or standards achieve an efficient solution except in special cases when there is little uncertainty rules are superior to discretion because discretionary policy gives the firm an incentive to distort investment in order to influence future regulation however when uncertainty is large discretion is superior to rules because it allows regulation to incorporate new information taxes are superior to standards under discretion regardless of the relative slopes of marginal costs and marginal damages for the case of quadratic abatement costs and damages

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

quantifying the effects of uncertain climate and environmental policies on investments and carbon emissions a case study of chile abstract in this article we quantify the effect of uncertainty of climate and environmental policies on transmission and generation investments as well as on co2 emissions in chile we use a two stage stochastic planning model with recourse or corrective investment options to find optimal portfolios of infrastructure both under perfect information and uncertainty under a series of assumptions this model is equivalent to the equilibrium of a much more complicated bi level market model where a transmission planner chooses investments first and generation firms invest afterwards we find that optimal investment strategies present important differences depending on the policy scenario by changing our assumption of how agents will react to this uncertainty we compute bounds on the cost that this uncertainty imposes on the system which we estimate ranges between 3 2 and 5 7 of the minimum expected system cost of 57 6b depending on whether agents will consider or not uncertainty when choosing investments we also find that if agents choose investments using a stochastic planning model uncertain climate policies can result in nearly 18 more co2 emissions than the equilibrium levels observed under perfect information our results highlight the importance of credible and stable long term regulations for investors in the electric power industry if the goal is to achieve climate and environmental targets in the most cost effective manner and to minimize the risk of asset stranding

renewable energy policy evaluation using real option model the case of taiwan abstract this study presents a policy benefit evaluation model that integrates cost efficiency curve information on renewable power generation technologies into real options analysis roa methods the proposed model evaluates quantitatively the policy value provided by developing renewable energy re in the face of uncertain fossil fuel prices and re policy related factors the economic intuition underlying the policy making process is elucidated while empirical analysis illustrates the option value embedded in the current development policy in taiwan for wind power in addition to revealing the benefits that re development provides when considering real options analytical results indicate that roa is a highly effective means of quantifying how policy planning uncertainty including managerial flexibility influences re development in addition to assessing the policy value of current re development policy this study also compares policy values in terms of internalized external costs and varying feed in tariff fit simulation results demonstrate that the re development policy with internalized co2 emission costs is appropriate policy planning from sustainability point of view furthermore relationship between varying fit and policy values can be shown quantitatively and appropriate fit level could be determined accordingly

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

the determinants of est adoption by manufacturing plants in developing countries abstract this article reports on the findings of a survey undertaken in late 2001 early 2002 on the determinants of environmentally sound technology est adoption by 98 plants in eight developing countries we review the literature on technology diffusion and technology capabilities as well as empirical studies with an exclusive focus on developing countries that explicitly addressed environmental performance or est adoption to formulate our heuristic model that guided our investigation we examine in some detail the determinants of both prevention and abatement technologies which has seldom been investigated in developing countries in full recognition of literature that cites a host of reasons that cause plants to adopt est we take into account both contextual and plant specific factors we use an ordered choice model that revealed that plant specific factors assume a pre dominant role in explaining the adoption of higher order of complexity est plant specific factors specifically environmental commitment technological capabilities and ownership and market factors specifically foreign involvement and water and energy price perception matter in determining the type of technological response and thus in explaining the adoption of higher order complexity est two governmental factors regulatory implementation strategy and international donor assistance also play a role in the adoption of est however civil society in particular community pressure that has been identified as an important determinant of environmental performance does not play a role because of the way the dependent variable is constructed to capture higher orders of technological complexity

biodiesel investment in a disruptive tax credit policy environment abstract an investigation of poisson type policy jumps on biodiesel investment considers the theory of investment under uncertainty the analysis studies the probability of implementing a policy if it is not in effect and the probability of withdrawal if it is in effect an application models the policy switching regime of the discontinuous u s federal tax credit of 1 00 per gallon on biodiesel results support that time inconsistent government policies do lead to market uncertainty the analysis reveals a pronounced negative impact on decisions to invest in a biodiesel refinery results do indicate a consistent policy switching regime may not be that disruptive to the emerging biodiesel industry it is policy uncertainty that drives the option pricing thresholds and a consistent policy switching does not increase the uncertainty

what is the economics of climate change a major review of the economics of climate change under the leadership of professor sir nicholas stern was announced at the end of july 2005 reporting to the united kingdom s chancellor of the exchequer and to the prime minister the stern review on the economics of climate change is due to report in autumn 2006 this article sets out some of the issues the review is considering

paradigm changing vs paradigm deepening innovation how firm scope influences firm technological response to shocks we examine the direction of firms research efforts as they respond to the shock of a sharp increase in the price of a key input in terms of direction firms can respond to this shock with paradigm changing investments that develop technologies to use substitute inputs or with paradigm deepening investments that develop technologies to improve the utilization efficiency of the existing input we develop a framework that suggests that firms emphasis on paradigm changing versus paradigm deepening investments depends on the degree of input relatedness across their businesses we test our hypotheses by examining the responses of large manufacturing firms in the united states to the oil shock of the early 1980s our framework predicts and our results show that the more related a firm s businesses are the larger its investments into paradigm changing technologies are and the smaller its investments into paradigm deepening technologies in response to the oil shock are we identify the implications of these findings for technological evolution and diversification literatures

the clean development mechanism stochastic permit prices and energy investments abstract we analyze the impact on energy investments stemming from different emission permit classes by considering permits that are allocated inside the european emission trading scheme and secondary certified emission reduction scer permits originating from the clean development mechanism one price taking firm which is subject to emission regulation has the choice to invest in gas or wind power plant the firm faces uncertainty regarding stochastically evolving permit prices while it receives a premium on the electricity price for wind energy as a first step we determine the value of the option to invest into a gas power plant over time then we calculate the investment probability of a gas power investment in a range of policy scenarios we find that allowing the usage of scer permits in the present policy framework has a positive impact on gas power investment decoupling the price processes has a similar effect if the quota of scer permits is doubled the decrease in the investment probability for wind power is large we carry out sensitivity tests for different parameter values and find that investment behavior changes significantly with differing interest rates the wind energy premium and volatility

geographic aggregation and induced innovation in american agriculture the induced innovation hypothesis is tested for the usa and western regions using cointegration procedures an error correction model separates short run and long run effects of relative price changes a significant difference in the elasticities of factor substitution along the isoquant and the innovation possibility curve implies induced innovation the estimated results support the hypothesis for washington the pacific northwest and the western region but not for the nation corroborative tests of weak exogeneity fail to support the hypothesis in any of the geographic units changes in output level and research investment do not significantly bias agricultural technology in the usa

on the nature of technologies knowledge procedures artifacts and production inputs in the most general terms a technology can be seen as a human constructed means for achieving a particular end such as the movement of goods and people the transmission of information or the cure of a disease these means most often entail procedures regarding how to achieve the ends concerned particular bits of knowledge artifacts and of course specific physical inputs necessary to yield the desired outcomes in fact the procedures and the underlying knowledge they draw upon the physical and intangible inputs implicated and the performance characteristics of outputs are different but complementary aspects of what technology is these things are the object of this short essay copyright the author 2009 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

globalizing carbon lock in this paper extends the arguments surrounding carbon lock in elaborated in unruh energy policy 28 2000 817 30 2002 317 to countries currently undergoing industrialization it argues that for numerous reasons industrializing countries are unlikely to leapfrog carbon intensive energy development on the contrary carbon lock in may be globalizing and could further constrain climate change mitigation options it is then argued that many policy recommendations ignore carbon lock in possibly limiting their potential for successful implementation the paper then discusses four policy approaches that appear to have advantages given lock in conditions it is recognized however that relative ease of implementation does not necessarily equate with superiority instead it is merely a path dependent outcome of past development decisions pursuing policies on the basis of relative implementation ease may help address the issue of climate change but could also result in sub optimal outcomes along other dimensions of sustainable development

technology choice under emission regulation uncertainty in international container shipping abstract we present a real options approach to evaluate technology and capacity choices under regulatory uncertainty our two phase regime switching model includes the option of investing in different technologies as well as a charter and layup option respectively for a base case version of this model we derive an analytical solution before studying the effect of regulatory uncertainty in a numerical extension that relaxes certain restrictive assumptions we then describe three regulatory regimes an emissions cap an emissions tax and a cap and trade market and compare how effectively each reduces emissions applying the model to maritime container shipping we develop insights on the optimal technology choice for reducing sox emissions we find that regulatory uncertainty can increase not only project values but also owned capacity from a regulatory perspective an emissions cap reduces emissions more effectively whereas an emissions tax reduces the cost of regulation the cap and trade market emerges in many respects as superior to an emissions tax finally we show that setting the emissions cap level or deciding on the level above which an emissions tax or emissions trade apply is critical because reduction in total industry emissions are not necessarily continuous

considering risks in early stage investment planning for emission abatement technologies in large combustion plants fossil fuels will continue to be the most important energy source for electricity generation in most parts of the world for the next decades therefore emission abatement technologies in large combustion plants are an important measure to reduce the emission of pollutants and to lower the negative effects thereof for humans animals and the environment investment decisions for emission reduction measures are however facing various kinds of risks and uncertainties caused by political technological economic and legal influences the consideration of these risks in early stage investment planning is often complex yet important for investors this paper investigates the possibilities to consider risks and uncertainties in early stage investment and cost calculation methodologies of different complexity the real options analysis is presented as well as less complex methods such as monte carlo or sensitivity analyses that lower the calculation effort the application of a specifically developed risk portfolio is recommended before quantitatively investigating risks this portfolio helps to identify the most critical risks and to focus on them reducing again the calculation effort the presented approach is not only of interest for investors but also for policies especially if data is scarce or uncertainties exist regarding specific plant parameters or cost and price components the content of this paper is presented using the example of nitrogen oxide emission reduction measures it is however possible to transfer the results to other pollutants or technologies in a related context

competition and innovation evidence from financial services abstract this paper presents new evidence on the relationship between competition and innovation by extending previous literature from manufacturing to financial services we introduce a new measure of overall innovation by estimating and enveloping annual minimum cost frontiers to create a global frontier the distance to the global frontier constitutes each bank s technology gap which decreases if the bank manages to innovate our innovation measure enables us to derive and estimate the model of aghion et al 2005b at the firm level for the us banking industry based on individual bank call report data for the period 1984 2004 consistent with theoretical and empirical work by aghion et al we find evidence of an inverted u relationship between competition and innovation that is robust over several different specifications further evidence on major structural changes in the us banking industry indicates that banks moved beyond their optimal innovation level and that interstate banking deregulation resulted in lower bank innovation policy implications to financial reform and prudential regulation are discussed also

credible carbon policy the paper sets out the credibility problem in carbon policy provides a number of examples of non credibility in recent energy policy and identifies the costs of failing to address it the time inconsistency of carbon policy arising because of multiple objectives the irreversibility of energy investments and the scope for ex post reneging on ex ante commitments to set policy instruments such as carbon taxes or emission permits at appropriate levels is set in a conceptual framework analogies with monetary policy are drawn and a solution to the time inconsistency problem is proposed through the establishment of an energy carbon agency

applying real options analysis to assess cleaner energy development strategies abstract the energy industry accounts for the largest portion of co 2 emissions is facing the issue of compliance with the national clean energy policy the methodology for evaluating the energy mix policy is crucial because of the characteristics of lead time embedded with the power generation facilities investment and the uncertainty of future electricity demand in this paper a modified binomial model based on sequential compound options which may account for the lead time and uncertainty as a whole is established and a numerical example on evaluating the optional strategies and the strategic value of the cleaner energy policy is also presented it is found that the optimal decision at some nodes in the binomial tree is path dependent which is different from the standard sequential compound option model with lead time or time lag concept the proposed modified binomial sequential compound real options model can be generalized and extensively applied to solve the general decision problems that deal with the long lead time of many government policies as well as capital intensive investments

carbon taxation in russia prospects for a double dividend and improved energy efficiency russia is not only one of the world s major sources of carbon based energy coal oil and gas but is also one the most intensive users of energy furthermore russia accounts for a disproportionately large share of global carbon dioxide emissions some 5 to 6 of global carbon dioxide emissions eia 2011a it has been estimated world bank 2008 that russia could reduce its use of primary energy use by 45 with consequent economic and environmental benefits high energy and carbon intensity of the russia economy is inter alia explained by low energy prices due to high export taxes as well as administrative regulation of domestic prices of gas and electricity and low environmental taxes carbon taxes are one such pigouvian tax and they would address concerns on several fronts simultaneously in the short to medium term they would inter alia lead to lower ghg emissions and encourage the diffusion of more energy efficient technologies in the longer term the increased cost of energy inputs is expected to induce technological progress in this analysis the macroeconomic and sectoral effects of carbon taxes on the russia economy are examined this analysis addresses the following objectives i to test the double dividend hypothesis under perfect and imperfect competition in output markets to analyse ii the incidence of carbon taxes iii impacts on sectoral competitiveness iv effects on income equity and v interactions of carbon taxes with other taxes a computable single country multi sector comparative static cge model is employed russland verfugt nicht nur uber einen der grosten vorrate an kohlenstoffbasierter energie wie kohle rohol und gas sondern ist auch einer der grosten energieverbraucher daruber hinaus ist russland fur einen uberproportional grosen anteil von kohlendioxid emission etwa 5 bis 6 der weltweiten kohlendioxidemission verantwortlich mit der einfuhrung einer kohlendioxidsteuer konnten gleichzeitig unterschiedliche wirkungen erzielt werden kurz und mittelfristig wurden kohlenstoffsteuern sowohl zu einer reduzierung von treibhausgasemissionen als auch zur einfuhrung von energieeffizienteren technologien fuhren langfristig wird erwartet dass hohe energiekosten den anreiz zur entwicklung und zur investition in energiesparenden technischen fortschritt erhohen die vorliegende arbeit analysiert und bewertet die makrookonomischen und sektoralen auswirkungen einer einfuhrung von kohlenstoffsteuern auf die russische wirtschaft die ziele der arbeit bestehen darin die hypothese der doppelten dividende fur den fall des vollkommenen und des unvollkommenen wettbewerbs auf gutermarkten zu uberprufen und die inzidenz einer kohlenstoffsteuer ihre auswirkungen auf die sektorale wettbewerbsfahigkeit ihre auswirkungen auf die einkommensverteilung und die interaktion von kohlenstoffsteuern mit anderen steuern zu analysieren und zu bewerten als methodischer ansatz wurde ein single country und multi sektor model gewahlt

low or no subsidy proposing a regional power grid based wind power feed in tariff benchmark price mechanism in china abstract the chinese government plans to adopt a low or no subsidy policy mechanism on renewable energy power development in the future to achieve a balance between reducing financial burden on the government and ensuring profitability of investors as well as to account for the regional differences in china a novel regional wind power grid feed in tariff benchmark price mechanism by net present value npv method and real option ro method is proposed in this paper the results voice support on the appropriateness of gradually decreasing the wind feed in tariff fit benchmark price to as low as the coal fired fit the proposed fit price level is presented as a price range on the basis of a guaranteed internal rate of return irr falls in between 8 to 15 for wind power investors the results indicate that the current fit price should be readjusted and redistributed although the fit price in central and south china grids is recommended to be relatively high the npv of wind farm project value in six regional grids are at the same level

biodiversity conservation in a dynamic world may lead to inefficiencies due to lock in effects and path dependence abstract although biodiversity is generally diminishing in some areas its conservation is expanding however the exact path of this expansion is uncertain this can lead to problems of path dependence and lock in effects path dependence describes situations where history strongly influences present decisions and lock in effects refer to situations where an earlier decision provides strong incentives to follow a particular path even if more efficient alternatives are available later on we develop a conceptual ecological economic model to investigate which ecological and economic parameters favour the appearance of efficiency losses in biodiversity conservation due to path dependence and lock in effects in a dynamic two period two region model generally we find that efficiency losses occur if there are signals that guide the first period budget into a region that later turns out to be suboptimal if both time periods had been considered right from the beginning to illustrate the conservation relevance of our findings we present potential efficiency losses through path dependence in the hypothetical case of applying offsets to conserving the endangered maculinea teleius butterfly near the city of landau in germany

renewables and climate change mitigation irreversible energy investment under uncertainty and portfolio effects abstract ongoing negotiations under the unfccc center around the possibilities for stabilization of greenhouse gases at a safe level new energy technologies are assumed to make major contributions to this goal however in the light of scientific uncertainty e g about climate sensitivity feedback effects etc market uncertainty e g fuel price volatility technological uncertainty e g availability of renewable technology socio economic uncertainty e g development of different macroeconomic factors and policy uncertainty e g about commitment to specific targets and stability of co2 prices it is difficult to assess the importance of different technologies in achieving robust long term climate risk mitigation one example currently debated in this context is biomass based energy which can be used to produce both carbon neutral electricity and at the same time offer the possibility of negative emissions by capturing carbon from biomass combustion at the conversion facility and permanently storing it in this study we analyze the impact of uncertainty on investment decision making at the plant level in a real options valuation framework and then use the ggi scenario database iiasa 2009 as a point of departure for deriving optimal technology portfolios across different socio economic scenarios for a range of stabilization targets focusing in particular on the new low emission targets using alternative risk measures

economic valuation of an offshore wind farm in greece the role of individual s base state influences and beliefs in the value formation process abstract the increased concern for the impacts of climate change on the environment along with the growing industry of renewable energy sources and especially wind power has made the valuation of environmental services and goods of great significance offshore wind energy is being exploited exponentially and its importance for renewable energy generation is increasing we apply a double bound dichotomous contingent valuation method analysis in order to both a estimating the willingness to pay wtp of greek residents for green electricity produced by offshore wind farm located between the islands of tinos and andros and b identifying factors behind respondents wtp including individual s behaviour toward environment and individual s views on climate change and renewable energy a total of 141 respondents participated in the questionnaire results show that the respondents are willing to pay on average 20 every two months through their electricity bill in return for carbon free electricity and water saving from the wind farm respondents environmental consciousness and their perception towards climate change and renewable energy have a positive effect on their wtp

short term generation asset valuation a real options approach this paper discusses using real options to value power plants with unit commitment constraints over a short term period we formulate the problem as a multistage stochastic problem and propose a solution procedure that integrates forward moving monte carlo simulation with backward moving dynamic programming we assume that the power plant operator maximizes expected profit by deciding in each hour whether or not to run the unit that a certain lead time for commitment and decommitment decisions is necessary to start up and shut down a unit and that these commitment decisions once made are subject to physical constraints such as minimum uptime and downtime we also account for the costs associated with starting up and shutting down a unit last we assume that there are hourly markets for both electricity and the fuel used by the generator and that their prices follow ito processes using numerical simulation we show that failure to consider physical constraints may significantly overvalue a power plant

is demand pulled innovation equally important in different groups of firms previous empirical literature has tested the demand pull hypothesis and found that innovation may be driven by output using a balanced panel of 216 italian manufacturing firms 1995 2000 and checking for the path dependent nature of r d we find a role of sales in inducing r d however the demand pull effect plays a varying role for different sub samples of firms exporting firms liquidity constrained firms not subsidised firms and those not heading a group seem to be sensitive to sales in deciding r d these results have been obtained using a least squares dummy variable corrected estimator a recent panel data technique suitable for small samples

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

carbon taxation and market structure a cge analysis for russia abstract russia is one of the world s major sources of carbon based energy as well as one its most intensive users introducing carbon taxes can lead to a reduction in emissions and encourage investment in energy efficiency we investigate the economic effects of carbon taxes on the russian economy under perfect competition and a cournot oligopoly in output markets the main findings are i substituting carbon taxes for labour taxes can yield a strong double dividend in russia however welfare gains strongly depend on the labour supply elasticity and elasticities of substitution between capital labour and energy ii under the assumption of a cournot oligopoly with homogenous products and symmetric firms in the markets for natural gas petroleum and chemical products metals and minerals welfare costs of the environmental tax reform can be higher than under perfect competition this is because introducing carbon taxes leads to a reduction in already sub optimal output thereby exacerbating pre existing distortions arising from imperfect competition iii furthermore increases in energy costs can result in higher mark ups in some markets because of less competition resulting from firms exit

collusion under financial constraints collusion or predation when the discount factor is near one abstract this paper considers the possibility of collusion between financially constrained firms it is found that they cannot collude when the discount factor is sufficiently close to one while collusion emerges at lower discount factors

when green isn t mean economic theory and the heuristics of the impact of environmental regulations on competitiveness and opportunity cost abstract the conventional neoclassical economic wisdom argues that the opportunity costs of environmental regulations are high with negative implications for costs and profits and by implication for growth and per capita gross domestic product gdp the minority view that environmental controls induce cost offsets that minimise such opportunity costs is marginalised by the conventional wisdom which assumes that economic agents are x efficient in production a behavioral model of the firm is presented in this paper whereby x inefficiency in production prevails even in a world of perfect product market competition that is dominated by rational economic agents in this model environmental regulations affect both the level of x efficiency and the extent of technological change and greener firms can be cost competitive and profitable however private economic agents cannot be expected to adopt green economic policy independent of regulations since in this model there need not be any economic advantage accruing to the affected firms in becoming greener

relationships among circumstance pressure green technology selection and firm performance in their quest for greater sustainability firms need to deal with many variables that ultimately determine the selection of green technologies previous studies of the possible link between the application of green technology and firm performance have generally produced mixed results similarly studies of the relationship between environmentally friendly strategies and firm performance have also been inconclusive based on an extensive empirical study with 533 respondents from 98 firms in the chinese manufacturing industry we try to identify the essential factors and test the links among variables in the decision making process for green technology selection we use an integrated structure equation model to test the complexity of a firm s technology adoption the relationships among the various variables are tested based on empirical data from our questionnaire more specifically we measure the influences on green technology selection imposed by task oriented circumstances direct stakeholders market environment financial and social dynamics and macro circumstances legislation social and technological development phases etc the results show significant relationships between green technology selection and certain task oriented circumstances and macro circumstances which may facilitate proper action on the part of firms with regard to green practices based on our findings we present some managerial implications and insights that might be useful for adopters of green technologies and enhance environmental and overall performance we also discuss the limitations of our methodology at the end of the paper

a century long perspective on agricultural development this article strategically surveys the past century s literature on agricultural development we organize the discussion around three grand themes that reveal the richness of agricultural development as an intellectual endeavor first we explore the role of agriculture in the broader development process from a macroeconomic and political economy perspective we then examine the role of technological and institutional change in successful agricultural development finally the focus turns to a microeconomic perspective on agricultural household decision making and the problems of imperfect and missing markets asymmetric information and transactions costs that lead to widespread apparent inefficiency and disequilibrium

technological change in economic models of environmental policy a survey this paper provides an overview of the treatment of technological change in economic models of environmental policy numerous economic modeling studies have confirmed the sensitivity of mid and long run climate change mitigation cost and benefit projections to assumptions about technology costs in general technical progress is considered to be a noneconomic exogenous variable in global climate change modeling however there is overwhelming evidence that technological change is not an exogenous variable but to an important degree endogenous induced by needs and pressures hence some environmenteconomy models treat technological change as endogenous responding to socio economic variables three main elements in models of technological innovation are i corporate investment in research and development ii spillovers from r d and iii technology learning especially learning by doing the incorporation of induced technological change in different types of environmental economic models tends to reduce the costs of environmental policy accelerates abatement and may lead to positive spillover and negative leakage

financially constrained entry in a game with incomplete information in an earlier paper we presented an entry game with a monopolist and a potential entrant facing financial constraints in which the unique perfect equilibrium involved no entry here we consider a one sided incomplete information variant of the game in which the monopolist allows for the possibility that the entrant is committed to endure a price war to the limit of his capability we find a unique sequentially perfect equilibrium in which entry sometimes occurs when it does predatory price wars may result with the incumbent sometimes driving out the entrant but other times eventually abandoning the fight

localized technological change and efficiency wages across european regional labour markets antonelli c and quatraro f localized technological change and efficiency wages across european regional labour markets regional studies internal labour markets and industrial relations in continental europe are characterized by substantial rigidity of employed labour engendered by the tight conditions of regional labour markets this rigidity affects both the rate and the direction of technological change the increase of wages induces the localized introduction of biased technological change with clear effects on productivity levels the empirical evidence across a sample of european regions confirms the significant role of the changes in wages both on the increase of the output elasticity of labour and on multifactor productivity

economic history and the modern economist in this book nine economists and economic historians express their concern for the present state of economics and its development in the future from a variety of different approaches these scholars reassert the importance of economic history in the training of economists and urge that this perspective should not be lost in the future

social acceptance of renewable energy sources a review of contingent valuation applications abstract this paper presents a literature review addressing the public acceptance of renewable energy as a replacement for fossil fuels in electricity production this review was motivated by the global tendency for a substitution of conventional fuels by renewable energy sources res during the global financial crisis it studies research on the preferences and attitudes of local communities towards investments in renewable energy projects and their perception of the use of new energy technologies in their daily lives through various case studies worldwide an effort is made to identify the parameters that influence consumers energy behaviour together with their interest or lack thereof in the environmental impact of using fossil fuels to produce energy and their willingness to reduce it applications of contingent valuation are examined which are employed to analyse public attitudes towards the use of res for electricity production willingness to pay is observed to be correlated to socioeconomic characteristics including education interest in environmental issues and knowledge of res finally the profile of a typical green energy consumer and appropriate policy paths for the penetration of res into the energy market are outlined

real option valuation in renewable energy literature research focus trends and design abstract in light of intensive development of the renewable energy re sector a growing number of academic papers address the complexity of re investment planning and valuation to take account of the high risk profile and irreversibility of re investments researchers have resorted to sophisticated real options ro approaches that enable flexibility to be incorporated into project design in the face of an uncertain environment the variety of different frameworks and models adopted as well as a lack of aggregated analysis of the field suggest a need for a critical review of ro methodology and design in re assessment this study describes the research focus trends and design found in contemporary academic literature devoted to re valuation with a ro approach particular attention is given to ro in project and policy design the results give a comprehensive picture of existing research on the topic thus providing researchers with a solid foundation for further study and indications of directions for future development furthermore the findings provide policymakers and project planners with valuable insights into key aspects of re project and policy design

first mover advantage and the speed of competitive entry 1887 1986 abstract this paper examines historical changes in the duration of the interval between the commercial introduction of a new product and the time when entry by later competitors begins a priori reasons are examined why the duration of this interval in the u s economy may either expand or contract data for 46 major product innovations however show a systematic tendency for the interval identified above to contract over the last century the average time span was almost 33 years at the turn of the century and has declined to 3 4 years for innovations in 1967 86 empirical evidence suggests this change resulted largely from a lowering of absolute cost advantages of first movers through easier transfer of knowledge and skills across firms and was also facilitated by the growth of markets

subdividing the commons distributional conflict in the transition from collective to individual property rights in kenya s maasailand summary this paper suggests that explanations of property rights transformation need to move beyond models of relative price change and state enforcement to include accounts that accommodate conflict and competition among actors and the possibility that state actors may not provide the enforcement that is often taken for granted the transition from collective to individualized holdings in kenya s maasailand is burdened with politics and procedural problems that can undermine the gains anticipated in that move moreover in semi arid ecological settings individualization results in unstable land holdings necessitating re contracting and reaggregation by individual parcel owners

emissions trading and investment decisions in the power sector a case study in finland abstract organizations which consider investment in or divestment of power production licences capacity within the european community are exposed to the impacts of the european union emission allowance trading scheme eu ets in this paper the consequences of the eu ets on investment decisions are explored in a country specific setting in finland first we review the general mechanisms through which the eu ets influences size timing and cashflows of an investment next we discuss the projected changes in finnish power producers investment environment and examine the financial impacts due to the eu ets on a case investment decision a hypothetical condensing power plant 250 mwe the standard discounted cash flow dcf analysis is extended to take into account the value of two real options the option to wait and the option to alter operating scale in a quantitative investment appraisal the impact of emissions trading not only depends on the expected level of allowance prices but also on their volatility and correlation with electricity and fuel prices the case study shows that the uncertainty regarding the allocation of emission allowances is critical in a quantitative investment appraisal of fossil fuel fired power plants

the use of real options approach in energy sector investments abstract energy shortage global warming and climate change led to an increase in the use of alternative sources of energy with renewable energy sources res playing a fundamental role in this new energetic paradigm however the investment costs often constitute a major barrier to their spread use moreover the overall benefits of renewable energy technologies are often not well understood and consequently they are often evaluated to be not as cost effective as traditional technologies from the moment that the energy sector started a deregulation process with a high level of competitiveness and associated increased market uncertainty traditional project evaluation techniques alone became insufficient to properly deal with these additional risk and uncertainty factors the diffusion of the renewable energy technologies is also affected by this feature the way investors evaluate their investments call now for the use of more sophisticated evaluation techniques real options approach can deal with these issues and as so began to be considered and applied for the energy sector decision aid this approach it is now extensively widespread in evaluating investment projects in the energy sector a large set of applications in almost all fields of energy decision making from electricity generation technologies appraisal to policy evaluation is available in the literature however the use of this technique in the field of res is still limited and worth to be analysed this paper addresses this issue a review of the current state of the art in the application of real options approach to investments in non renewable energy sources and res is presented giving perspectives for further research in this field

wind power reliability valuation in a hydro dominated power market the colombian case abstract the design of market mechanisms that remunerates the reliability provided by a generator in a power market is a task that aims to ensure the normal operation of the system for the case of a hydro dominated system when wind power is introduced and operated under the merit order effect it is possible to assess the effect of the displacement of hydro generation due to wind generation over the system s reliability in terms of firm energy taking this into account a model that valuates the firm energy provided by wind power in a hydro dominated system is proposed this model considers the effect of wind power over the system s reservoirs and the market price of electricity and valuates the firm energy as the net savings of the system related to the increase in the firm energy of the system when wind power is introduced the results show that wind power under merit order effect increases the firm energy of the system and decreases the market price of electricity being the net savings in comparison to the corresponding hydro only system the reliability income that should be perceived by the wind power generator

modeling technology adoption as an irreversible investment under uncertainty the case of the turkish electricity supply industry this paper studies energy conversion technology adoption in the electricity supply sector from the perspective of irreversible investments under uncertainty and with a particular interest in environmental sustainability we develop a dynamic technology adoption model that is firmly rooted in economic theory and that takes important determinants of optimal investment in available technologies e g life cycle capital and operation cost explicitly into account uncertainty is introduced for the demand for peak load capacity unit generation costs and for the average electricity price we test the model empirically by applying it to data for the turkish power supply industry the model guided optimal investment schedule based on net present value considerations exhibits significant deviations from the actual investment outcome we find that the increased adoption of natural gas fired power generation technologies in turkey in recent years while contributing to environmental sustainability has had doubtful merits from an investor s perspective

impact of climate policy uncertainty on the adoption of electricity generating technologies this paper presents a real options model where multiple options are evaluated simultaneously so that the effect of the individual options on each other is accounted for we apply this model to the electricity sector where we analyze three typical technologies based on fossil fuel fossil fuel with carbon capture and renewable energy respectively in this way we can analyze the transition from co2 intensive to co2 neutral electricity production in the face of rising and uncertain co2 prices in addition such a modelling approach enables us to estimate precisely the expected value of perfect information i e the willingness of investors and producers to pay for information about the correct co2 price path as can be expected the expected value of information rises with increasing co2 price uncertainty in addition the larger the price uncertainty the larger are the cumulative co2 emissions over the coming century the reason for this is that the transition to less co2 intensive technologies is increasingly postponed with rising co2 price uncertainty by testing different price processes geometric brownian motion versus jump processes with different jump frequencies we can also make useful recommendations concerning the importance of policy predictability we find that it is better to have climate change policies that are stable over a certain length of time and change abruptly than less abrupt but more frequently changing policies less frequent fluctuations reduce the expected value of information and result in smaller cumulative co2 emissions