Uncertainty, Time Preferences And Investment in Climate Change Mitigation Technology

Dominic Hauck

Research output: ThesisThesis fully internal (DIV)

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Despite mounting evidence that climate change constitutes a major threat to global wellbeing, employment of climate change mitigate technologies is hesitant. Particularly, Carbon Capture and Storage (CCS) technologies, which combine various technological components to sequestrate CO2 from the waste gases of stationary emission sources and inject the CO2 into geological formations, has not been implemented yet on an industrial scale. Given the optimism of many experts concerning the market penetration of CCS, this comes as a surprise.

In this thesis, we take a closer look at the reasons that have been suggested to explain why application of CCS has remained limited. Among the obstacles mentioned, low carbon price levels, uncertainty in gas and carbon price developments and local environmental activism against CCS, play an outstanding role. Hence, we discuss each of these issues in this thesis

First, we discuss how low carbon price levels may result from hyperbolic discounting. Particularly, we argue how biased perceptions of inconsistent time preferences may cause the breakdown of climate change policy. Next, in the context of a real option model, we show how the value of CO2 storage capacity determines the value of CCS as a climate change mitigation technology. We discuss how the opportunity costs of using certain geologic formations as CO2 storage affect the total costs of realizing CCS projects. Finally, we analyze under which circumstances investors suffer from local environmental activism and indicate that activism might impose positive externalities on investors as well.
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • University of Groningen
  • Jepma, Catrinus, Supervisor
  • Brakman, Steven, Supervisor
  • Haan, Marco, Co-supervisor
Award date2-Jun-2014
Place of PublicationGroningen
Print ISBNs978-90-367-7013-2
Electronic ISBNs978-90-367-7014-9
Publication statusPublished - 2014

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