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A Monte-Carlo Least Squares Approach for CO2 Abatement Investment Options Analysis with Linearly Non-Separable Profits of Power Plants
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 Title & Authors
A Monte-Carlo Least Squares Approach for CO2 Abatement Investment Options Analysis with Linearly Non-Separable Profits of Power Plants
Park, Hojeong;
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As observed and experienced in EU ETS, allowance price volatility is one of major concerns in decision making process for abatement investment. The problem of linearly non-separable profits functions could emerge when one power company holds several power plants with different technology specifications. Under this circumstance, conventional analytical solution for investment option is no longer available, thereby calling for the development of numerical analysis. This paper attempts to develop a Monte-Carlo least squares model to analyze investment options for power companies under emission trading scheme regulations. Stochastic allowance price is considered, and simulation is performed to verify model performance.
allowance price;real options;Monte-Carlo least squares;
 Cited by
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