A control model of policy uncertainty and energy R&D investments
by Ekundayo Shittu, Erin Baker
International Journal of Global Energy Issues (IJGEI), Vol. 32, No. 4, 2009

Abstract: Using an optimal control model, we explore the reaction of a firm's optimal investment into an R&D program that aims at non-carbon technologies under uncertainties about a future carbon tax. We find; first, that the influence of risk on investment decisions depends on model formulation. Second, near-term investments decrease in risk in the magnitude of a carbon tax, but increase in uncertainty in the timing of a carbon tax.

Online publication date: Wed, 31-Mar-2010

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