Impacts of the Fairly Priced REDD-based CO2 Offset Options on the Electricity Producers and Consumers

Krasovskiĭ, A. A.; Khabarov, Nikolay; Obersteiner, Michael

doi:10.17059/2014-3-27

Cited by 2 publications

(8 citation statements)

References 20 publications

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“…This assumption is straightforward in the provided modeling framework [20]. It is also consistent with results of larger scale modeling [31].…”

Section: Assumptionsupporting

confidence: 81%

“…Given the electricity producer's technological capacity and market power, they can solve an optimization problem for potential CO 2 prices. In [20] we show that in response to growing CO 2 price, the profit decreases and electricity price increases. Therefore uncertain CO 2 prices bear risk of profit loss for the electricity producer.…”

Section: Modeling Frameworkmentioning

confidence: 80%

“…We assume that the hourly profile changes proportionally to the aggregate demand (see [20] and Sect. 4.1 for details) and introduce the feasibility domain X, which contains all technological mixes (controls) satisfying the hourly demand:…”

Section: Notationsmentioning

confidence: 99%

“…The elevating CO 2 price might impact not only the profits of the electricity producer (which decrease), but also the electricity prices for the consumer (which increase) [20]. Hence, some financial instruments may be implemented today in order to be prepared for uncertain CO 2 prices in the future.…”

Section: Introductionmentioning

confidence: 99%

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$$\hbox {CO}_2$$ CO 2 -intensive power generation and REDD-based emission offsets with a benefit-sharing mechanism

2016

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We propose and explore financial instruments supporting programs for reducing emissions from deforestation and forest degradation (FI-REDD). Within a microeconomic framework we model interactions between an electricity producer (EP), electricity consumer (EC), and forest owner (FO). To keep their profit at a maximum, the EP responds to increasing CO 2 prices by adjusting electricity quantities generated by different technologies and charging a higher electricity price to the EC. The EP can prepare for future high (uncertain) CO 2 prices by employing FI-REDD: they can purchase an amount of offsets under an unknown future CO 2 price and later, when the CO 2 price is discovered, decide how many of these offsets to use for actually offsetting emissions and sell the rest on the market, sharing the revenue with the FO. FI-REDD allows for optional consumption of emission offsets by the EP (any amount up to the initially contracted volume is allowed), and includes a benefit-sharing mechanism between the EP and FO as it regards unused offsets. The modeling results indicate that FI-REDD might help avoid bankruptcy of CO 2 -intensive producers at high levels of CO 2 prices and therefore serve as a stabilizing mechanism during the transition of energy systems to greener technologies. The analytical results demonstrate the limits for potential market size explained by existing uncertainties. We illustrated that when suppliers and consumers of REDD offsets have asymmetric information on future CO 2 prices, benefit-sharing increases the contracted REDD offsets quantity.

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“…This assumption is straightforward in the provided modeling framework [20]. It is also consistent with results of larger scale modeling [31].…”

Section: Assumptionsupporting

confidence: 81%

Section: Modeling Frameworkmentioning

confidence: 80%

Section: Notationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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$$\hbox {CO}_2$$ CO 2 -intensive power generation and REDD-based emission offsets with a benefit-sharing mechanism

2016

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“…This paper elaborates on the development of financial instruments that support Reduced Emissions from Deforestation and Degradation (REDD) [1,2,3]. In the papers [4,5] decision-making of the price-taking electricity producers consists of choosing between investing in research and development (R&D) to implement new technologies (carbon capture and storage (CCS) modules) and buying REDD options.…”

Section: Introductionmentioning

confidence: 99%

Fair pricing of REDD-based emission offsets under risk preferences and benefit-sharing

2016

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Impacts of the Fairly Priced REDD-based CO2 Offset Options on the Electricity Producers and Consumers

Cited by 2 publications

References 20 publications

$$\hbox {CO}_2$$ CO 2 -intensive power generation and REDD-based emission offsets with a benefit-sharing mechanism

$$\hbox {CO}_2$$ CO 2 -intensive power generation and REDD-based emission offsets with a benefit-sharing mechanism

Fair pricing of REDD-based emission offsets under risk preferences and benefit-sharing

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