Speaker
Description
We investigate the limitations of cap-and-trade systems as a tool for driving investments in low carbon industrial technologies. Investments may be delayed, and suboptimal technology choice may result from myopic behaviour, financial constraints, and policy risk. We develop a partial equilibrium model that explicitly incorporates such imperfect behaviour in cap-and-trade systems. We evaluate how these imperfections influence the carbon price signal and their subsequent impact on irreversible investment decisions of industries. We find that such imperfections can distort carbon price trajectories, leading to suboptimal technology choice and delayed investments in low carbon technologies. Vice versa, imperfect behaviour of investors due to other external factors may influence the carbon price trajectory if the group of affected agents is sufficiently large to influence carbon prices. The results indicate a need for complementary policy instruments to address these carbon market imperfections. To better align model outcomes with the reality of carbon markets,we advocate that modellers use techniques that capture imperfect market behaviour.
| If your abstract is not accepted for an oral presentation, would you be interested in presenting it as a poster instead? | No |
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| If accepted by the Scientific Board, I agree to have my presentation/poster and abstract published on the Belgian Climate Centre websites and social media. | Yes |
