by Tim Laing and Michael Grubb
- There has been a wide discussion on the different properties between carbon taxes, cap-and-trade schemes and hybrid instruments such as cap-and- trade schemes with price floors and ceilings. There has been less discussion on the incentives to investment that each of these instruments may provide. We build a three-period model to investigate the incentives offered to a large firm with diversified abatement options from such instruments when facing a choice between investing in low-carbon technologies with potential learning benefits. We parameterise our model for a system similar to the EUETS and for two sample technologies, biomass for electricity and coal with carbon capture and storage.
Laing, T. and M. Grubb (2010). "The Impact of Instrument Choice on Investment in Abatement Technologies: A Case Study of Tax versus Trade Incentives for CCS and Biomass for Electricity." EPRG Working Paper: EPRG1004, Mar 2010.
