A Real Options Approach to Clean Development Mechanism
نویسنده
چکیده
Under the Kyoto Protocol, CDM (Clean Development Mechanism) projects are GHGfriendly projects hosted by developing countries that earn carbon credits to overcome nancial and economic barriers. In this paper, we model the dynamics of investments in a unilateral, one revenue stream CDM project with the real options method, taking into account the irreversibility and ongoing uncertainty pertaining to the process. The model proposed is a modi ed version of the Majd and Pindyck (1987) model that allows for a nite horizon of the operating period. We assume that the risks pertaining to the registration period while construction may start expose the project to a catastrophic failure of its carbon revenues. For the solution, a numerical method is implemented with calibrated parameter values. The analyses show that the main threat to the CDM market is the volatility of carbon prices.
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تاریخ انتشار 2015