Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case
A carbon market was introduced for the first time in January 2005, when the EU assigned carbon emission allowances to approximately 15,000 enterprises in 25 countries and established a market for emissions trading. In Korea, the carbon emission trading system started from January 2015 with three pha...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2020-02-01
|
| Series: | Energies |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1996-1073/13/3/622 |
| _version_ | 1811297767576829952 |
|---|---|
| author | Kyung-Taek Kim Deok-Joo Lee Donghyun An |
| author_facet | Kyung-Taek Kim Deok-Joo Lee Donghyun An |
| author_sort | Kyung-Taek Kim |
| collection | DOAJ |
| description | A carbon market was introduced for the first time in January 2005, when the EU assigned carbon emission allowances to approximately 15,000 enterprises in 25 countries and established a market for emissions trading. In Korea, the carbon emission trading system started from January 2015 with three phases running up to 2025. As many countries have introduced carbon markets, new evaluation models that consider not only fossil energy prices but also carbon emission costs are necessary because additional costs of using fossil energy might have been incurred due to carbon emissions. The purpose of this paper is to develop a real option model that considers not only the uncertainty of existing fossil energy prices, but also the uncertainty of carbon emission rights prices, in evaluating the economic value of renewable energy R&D. Using the real option model, we attempted to assess the effects of the uncertainty of newly appearing carbon markets on the economic value of renewable energy R&D in Korea empirically. Furthermore, we derived an optimal decision path according to the uncertain future situations of fossil energy and carbon markets by analyzing a trinomial lattice model in which the optimal timings of R&D and deployment are identified. |
| first_indexed | 2024-04-13T06:09:08Z |
| format | Article |
| id | doaj.art-b2692b5ad8ef44ee969ba10c9738fb4c |
| institution | Directory Open Access Journal |
| issn | 1996-1073 |
| language | English |
| last_indexed | 2024-04-13T06:09:08Z |
| publishDate | 2020-02-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Energies |
| spelling | doaj.art-b2692b5ad8ef44ee969ba10c9738fb4c2022-12-22T02:59:08ZengMDPI AGEnergies1996-10732020-02-0113362210.3390/en13030622en13030622Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean CaseKyung-Taek Kim0Deok-Joo Lee1Donghyun An2R&D Strategy Division, Korea Institute of Energy Research, Daejeon 34129, KoreaDepartment of Industrial Engineering, Seoul National University, Seoul 08826, KoreaDepartment of Industrial Engineering, Seoul National University, Seoul 08826, KoreaA carbon market was introduced for the first time in January 2005, when the EU assigned carbon emission allowances to approximately 15,000 enterprises in 25 countries and established a market for emissions trading. In Korea, the carbon emission trading system started from January 2015 with three phases running up to 2025. As many countries have introduced carbon markets, new evaluation models that consider not only fossil energy prices but also carbon emission costs are necessary because additional costs of using fossil energy might have been incurred due to carbon emissions. The purpose of this paper is to develop a real option model that considers not only the uncertainty of existing fossil energy prices, but also the uncertainty of carbon emission rights prices, in evaluating the economic value of renewable energy R&D. Using the real option model, we attempted to assess the effects of the uncertainty of newly appearing carbon markets on the economic value of renewable energy R&D in Korea empirically. Furthermore, we derived an optimal decision path according to the uncertain future situations of fossil energy and carbon markets by analyzing a trinomial lattice model in which the optimal timings of R&D and deployment are identified.https://www.mdpi.com/1996-1073/13/3/622carbon emission marketrenewable energyeconomic evaluationr&d investmentreal options |
| spellingShingle | Kyung-Taek Kim Deok-Joo Lee Donghyun An Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case Energies carbon emission market renewable energy economic evaluation r& d investment real options |
| title | Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case |
| title_full | Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case |
| title_fullStr | Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case |
| title_full_unstemmed | Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case |
| title_short | Real Option Valuation of the R&D Investment in Renewable Energy Considering the Effects of the Carbon Emission Trading Market: A Korean Case |
| title_sort | real option valuation of the r amp d investment in renewable energy considering the effects of the carbon emission trading market a korean case |
| topic | carbon emission market renewable energy economic evaluation r& d investment real options |
| url | https://www.mdpi.com/1996-1073/13/3/622 |
| work_keys_str_mv | AT kyungtaekkim realoptionvaluationoftherampdinvestmentinrenewableenergyconsideringtheeffectsofthecarbonemissiontradingmarketakoreancase AT deokjoolee realoptionvaluationoftherampdinvestmentinrenewableenergyconsideringtheeffectsofthecarbonemissiontradingmarketakoreancase AT donghyunan realoptionvaluationoftherampdinvestmentinrenewableenergyconsideringtheeffectsofthecarbonemissiontradingmarketakoreancase |