Investment Decisions of Fired Power Plants on Carbon Utilization under the Imperfect Carbon Emission Trading Schemes in China

Zhang, Weiwei; Liu, Linlin

doi:10.3390/pr7110828

Cited by 9 publications

(10 citation statements)

References 34 publications

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“…For banking institutions, on the one hand, the green transformation of enterprises is inevitable in the trend of low-carbon development. This transformation will create significant funding needs (Reboredo and Ugolini, 2020), such as investments in green technologies (Zhang and Liu, 2019) and low-carbon production equipment (Wu et al, 2017), all of which can be new growth points for banks. On the other hand, by engaging in green production, enterprises can avoid hefty fines due to environmental pollution, indirectly reducing the incidence of banks' non-performing loans (Battiston et al, 2021).…”

Section: Meets Agreed Standardsmentioning

confidence: 99%

A stochastic evolutionary game model of green credit participation behavior among banks and enterprises

Sun,

Feng

2024

Preprint

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With the growing severity of environmental problems, green credit has become an important means of promoting low-carbon development, however, the motivation of banks and enterprises to participate in green credit is insufficient. In order to effectively guide banks and enterprises to actively participate in green credit, we constructed a stochastic evolutionary game model for banks and enterprises to participate in green credit, and analyzed the dynamic game relationship between banks and enterprises. Due to the uncertainty of the external environment, we introduce Gaussian white noise in the replicated dynamic equations, and finally, we use numerical simulation to describe the dynamic evolution trend of the two-dimensional game system. The results show that the stochastic disturbances from external uncertainties amplify the fluctuation range of the game between banks and enterprises and shortening the time to achieve a stable strategy. As enterprises’ fulfillment levels improve, the strategic choices of both banks and enterprises gradually converge to (implement, participate), with banks converging more swiftly. When the government provides certain subsidies, both banks and enterprises tend to opt for green credit, however, after subsidies reach a certain threshold, increasing them no longer significantly impacts strategic choices. An escalation in carbon trading prices also spurs enterprises to choose green credit.

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Section: Meets Agreed Standardsmentioning

confidence: 99%

A stochastic evolutionary game model of green credit participation behavior among banks and enterprises

Sun,

Feng

2024

Preprint

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“…Given that the market-oriented electricity trading of coal-based electricity plants has accounted for about 50% resources, and the generation cost is significantly lower than the benchmark electricity price, to further promote market-oriented reform, on January 1, 2020, the government canceled the coal-electricity price linkage and changed the benchmark electricity price mechanism into a market-oriented mechanism of "benchmark price+floating up and down". The dispatching mechanism of China's electricity industry does not align with market demand, the linkage between the carbon and electricity markets has not been achieved, and policies related to the two markets are not fully coordinated (Zhang and Liu 2019). Accordingly, China's electricity regulations have interfered with the process of transferring part of the carbon cost to downstream consumers.…”

Section: The Characteristics Of China's Electricity Marketmentioning

confidence: 99%

Carbon tax vs. carbon market: Which one could better help China’s coal-based electricity industry achieve carbon neutrality?

Song

et al. 2023

Preprint

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This paper aims to investigate which carbon pricing mechanism, carbon tax or carbon market, could better promote the carbon neutrality of China’s coal-based electricity industry that indeed exerts significant impacts on climate change and industrial prosperity. By building a stochastic electricity price model, we reveal the price shock of both carbon tax and carbon market under different carbon pricing goals. Our key empirical results are as follows. First, both carbon tax and carbon market could significantly trigger the price volatility of coal-based electricity industry, while the shock impact of carbon market on such industry’s carbon emission is more significant than that of carbon tax. Second, by both carbon pricing mechanisms, carbon emission could be reduced up to 20%, and a key premise of achieving this goal is keeping carbon price at the level of 100 yuan/ton. Third, the volatility range of electricity price, which is policy-led, could not manifest the incentive impact of economic instruments on carbon emission reduction of coal-based electricity industry. Further, policy allows the upper limit of floating electricity price up to 15%. In general, we straighten out the linkage of carbon pricing tools and coal-based electricity costs, thereby constructing a carbon pricing mechanism for coal-based electricity industry to step into China’s carbon neutrality as soon as possible.

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“…Moreover, the application of real options can help to demonstrate how the presence of different uncertainties affects these threshold levels. Twelve papers from the reviewed literature set investigated the optimal timing of investments by determining the investment threshold levels of CO 2 price [17,19,31,33,34,37,39,42], oil price [17,32,33,42] and/or CO 2 utilization rate [37]. Yao et al [38] calculated the investment probability in the CCU project over different stages of the project; (2) Project valuation-valuing flexibility (VF): Besides determining the optimal timing of the investment, project valuation by real options analysis can also include the valuation of the flexibility that is embedded into the investment decision.…”

Section: Research Objectives In Ccu Projectsmentioning

confidence: 99%

Using Real Options Thinking to Value Investment Flexibility in Carbon Capture and Utilization Projects: A Review

Assche

Compernolle

2022

Sustainability

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Carbon capture and utilization (CCU) is one of the key technologies that may help to reduce industrial emissions. However, the deployment of CCU is hampered by various barriers, including high levels of technical, policy and market uncertainty. The real options theory (ROT) provides a method to account for these uncertainties and introduce flexibility in the investment decision by allowing decisions to be changed in response to the evolution of uncertainties. ROT is already being applied frequently in the evaluation of renewable energy or carbon capture and storage (CCS) projects, e.g., addressing the uncertainty in the price of CO2. However, ROT has only found a few applications in the CCU literature to date. Therefore, this paper investigates the specific types of uncertainty that arise with the utilization of CO2, identifies the types of real options present in CCU projects and discusses the applied valuation techniques. Research gaps are identified in the CCU literature and recommendations are made to fill these gaps. The investment decision sequence for CCU projects is shown, together with the uncertainties and flexibility options in the CCU projects. This review can support the real options-based evaluations of the investment decisions in CCU projects to allow for flexibility and uncertainty.

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Investment Decisions of Fired Power Plants on Carbon Utilization under the Imperfect Carbon Emission Trading Schemes in China

Cited by 9 publications

References 34 publications

A stochastic evolutionary game model of green credit participation behavior among banks and enterprises

A stochastic evolutionary game model of green credit participation behavior among banks and enterprises

Carbon tax vs. carbon market: Which one could better help China’s coal-based electricity industry achieve carbon neutrality?

Using Real Options Thinking to Value Investment Flexibility in Carbon Capture and Utilization Projects: A Review

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