Stochastic Income Statement Planning and Emissions Trading

IWH-Diskussionspapiere 4/2010

22 Pages Posted: 22 Aug 2010

See all articles by Wilfried Ehrenfeld

Wilfried Ehrenfeld

Halle Institute for Economic Research

Henry Dannenberg

Halle Institute for Economic Research

Date Written: February 18, 2010

Abstract

Since the introduction of the European CO2 emissions trading system (EU ETS), the development of CO2 allowance prices is a new risk factor for enterprises taking part in this system. In this paper, we analyze how risk emerging from emissions trading can be considered in the stochastic profit and loss planning of corporations. Therefore we explore which planned figures are affected by emissions trading. Moreover, we show a way to model these positions in a planned profit and loss account accounting for uncertainties and dependencies. Consequently, this model provides a basis for risk assessment and investment decisions in the uncertain environment of CO2 emissions trading.

Keywords: CO2, emissions trading, EU ETS, risk, stochastic business planning

JEL Classification: D81, G32, L59, Q54, Q56, Q58

Suggested Citation

Ehrenfeld, Wilfried and Dannenberg, Henry, Stochastic Income Statement Planning and Emissions Trading (February 18, 2010). IWH-Diskussionspapiere 4/2010, Available at SSRN: https://ssrn.com/abstract=1662321 or http://dx.doi.org/10.2139/ssrn.1662321

Wilfried Ehrenfeld (Contact Author)

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

Henry Dannenberg

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

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