Renewable Energy Investment and the Clean Development Mechanism

31 Pages Posted: 1 Apr 2010

Date Written: March 1, 2010

Abstract

This paper uses transaction and index data to empirically examine price formation in, and equilibrium characteristics of, the primary CDM market. Results point to the preemptive behaviour among intermediaries (carbon firms), and inefficiencies in information transmission between secondary and primary markets (potentially due to the limits of arbitrage). Since the primary carbon market is unstable and is prone to rational and irrational oscillations, the CDM, in its current form, is not a reliable policy tool for long-term renewable energy sector development plans, whenever fiscal regulatory instruments are available.

Keywords: Clean Development Mechanism, real options, renewable energy investment

JEL Classification: G31, Q42, Q54

Suggested Citation

Zavodov, Kirill, Renewable Energy Investment and the Clean Development Mechanism (March 1, 2010). Available at SSRN: https://ssrn.com/abstract=1581724 or http://dx.doi.org/10.2139/ssrn.1581724

Kirill Zavodov (Contact Author)

University of Cambridge ( email )

Magdalene College
Cambridge, CB3 0AG
United Kingdom

HOME PAGE: http://www.kirillzavodov.com/

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