Investments and Financial Flows Induced by Climate Mitigation Policies

32 Pages Posted: 28 Feb 2010

See all articles by Andrea Bastianin

Andrea Bastianin

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Alice Favero

Georgia Institute of Technology

Emanuele Massetti

Georgia Institute of Technology; CESifo (Center for Economic Studies and Ifo Institute); CMCC - Euro Mediterranean Centre for Climate Change

Date Written: February 24, 2010

Abstract

In this paper we use the hybrid integrated model WITCH to quantify and analyze the investments and financial flows stimulated by a climate policy to stabilize Greenhouse Gases concentrations at 550ppm CO2-eq at the end of the century. We focus on investments to decarbonize the power sector and on investments in knowledge creation. We examine the financial flows associated with the carbon market and the implications for the international trade of oil. Criticalities in investment requirements will emerge when coal power plants with carbon capture and sequestration and nuclear power plants are deployed around 2020-2040, both in high and low income regions. Investments in energy related R&D increase sharply and might cause stress in the short term. However, the transition to a low-carbon world, although costly, appears to be manageable from a financial point of view. In particular, R&D financial needs can easily be accommodated using revenues from the carbon market, which is expected to eventually become more important than the oil market in terms of traded value.

Keywords: Climate Change, Mitigation, Carbon Finance, Emission Trading, Energy Investments

JEL Classification: Q01, Q43, Q54, O32, O11

Suggested Citation

Bastianin, Andrea and Favero, Alice and Massetti, Emanuele, Investments and Financial Flows Induced by Climate Mitigation Policies (February 24, 2010). FEEM Working Paper No. 13. 2009. Available at SSRN: https://ssrn.com/abstract=1558385 or http://dx.doi.org/10.2139/ssrn.1558385

Andrea Bastianin

Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

U6 Building
Viale Piero e Alberto Pirelli, 22
Milano, 20126
Italy

Alice Favero

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

Emanuele Massetti (Contact Author)

Georgia Institute of Technology ( email )

685 Cherry St.
Atlanta, GA 30332-0345
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

CMCC - Euro Mediterranean Centre for Climate Change

via Augusto Imperatore, 16
Lecce, I-73100
Italy

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