30 research outputs found
Photovoltaic installations and land allocation under uncertainty
A real option model is developed to examine the crucial factors affecting the agricultural firms’ decision to quit the production and rent out the land to a company building a PV power plant. The public policies in support of investments in renewable energies have created the conditions for a market regarding investments in PV installations in agricultural areas.
The decision to switch offers to the agricultural firm and to society several economical, social and environmental benefits, representing sustainability. However, PV installations in agricultural areas require the allocation of a certain land area. By assigning a part of land to PV installations, thereby the area of land allocated to agricultural production decreases. Using a real option approach the trade-off between these two competing uses is studied. The real option approach is useful for the evaluation of decisions regarding PV installations since it takes into account the uncertainty regarding the agricultural commodities prices and the irreversibility of the decision taken by the agricultural firm.
The results illustrate how uncertainty and irreversibility are important factors and determine the decision of the agricultural firm to switch. These results have implications for the design and implementation of decision-making processes regarding PV installations and land allocation
Testing innovation, employment and distributional impacts of climate policy packages in a macro-evolutionary systems setting
Climate policy has been mainly studied with economic models that assume representative, rational agents. However, it aims at changing behavior associated with carbon-intensive goods that are often subject to bounded rationality and social preferences, such as status and imitation. Here we use a macroeconomic multi-agent model with such features to test the effect of various policies on both environmental and economic performance. The model is particularly suitable to address distributional impacts of climate policies, not only because populations of many agents are included, but also as these are composed of different classes of households driven by specific motivations. We simulate various policy scenarios, combining in different ways a carbon tax, a reduction of labor taxes, subsidies for green innovation, a price subsidy to consumers for less carbon-intensive products, and green government procurement. The results show pronounced differences with those obtained by rational-agent model studies. It turns out that demand-oriented subsidies lead to lower unemployment and higher output, but perform less well in terms of carbon emissions. The supply-oriented subsidy for green innovation results in a significant reduction of carbon emissions with a slight reduction of unemployment.Series: WWWforEurop
Policy responses by different agents/stakeholders in a transition: Integrating the Multi-level Perspective and behavioral economics
This short paper considers all possible stakeholders in different stages of a sustainability transition and matches their behavioral features and diversity to policies. This will involve an assessment of potential or expected responses of stakeholders to a range of policy instruments. Following the Multi-Level Perspective framework to conceptualize sustainability transitions, we classify the various transition policies at niche, regime and landscape levels. Next, we offer a complementary classification of policies based on a distinction between social preferences and bounded rationality. The paper identifies many barriers to making a sustainability transition and how to respond to them. In addition, lessons are drawn from the case of Denmark. The detailed framework and associated literature for the analysis was discussed in Milestone 31 of the WWWforEurope project (Gazheli et al., 2012).Series: WWWforEurop
How big is big enough? Toward a sustainable future by examining alternatives to the conventional economic growth paradigm
This study addresses how the sustainability crisis may be overcome by using alternatives to the
conventional economic growth paradigm. Based on a literature review, the paper identifies and
discusses three alternatives, namely negative, zero and positive economic growth. These alternatives
are compared from a feasibility and policy perspective in relation to the transition toward
sustainable development. The three alternatives are associated with very far‐reaching sets of
policies that have different focal points with regard to how the paradigm shift from the conventional
growth paradigm can be realized. All these alternatives, however, challenge the effectiveness
of market forces. The shortcomings of the alternatives (resistance to voluntary transition
with negative or zero growth, no proper consideration of the rebound effect for positive growth)
hinder the transition and must be further addressed by policy‐makers in public and private
sectors, as well as by civil society
Achieving sustainability transitions: Behavioral barriers, limits to green growth, and investments under uncertainty
Está
ampliamente
aceptado
que
es
necesaria
una
transición
urgente
hacia
la
sostenibilidad.
El
cómo
hacer
esa
transición
está
intensamente
en
discusión.
Está
claro,
sin
embargo,
que
implicará
grandes
cambios
radicales,
socio-‐técnicos,
que
van
mucho
más
allá
de
enfoques
tradicionales
de
políticas
públicas.
Esta
tesis
doctoral
aborda
este
reto
a
través
de
tres
estudios
distintos
y
complementarios.
El
primer
estudio
está
motivado
por
el
hecho
de
que
las
políticas
de
transición
-‐
en
términos
de
eficacia,
equidad
y
eficiencia
-‐
dependen
en
gran
medida
del
modelo
subyacente
de
la
conducta
individual.
Sólo
un
modelo
empíricamente
fundado
en
la
acción
individual
y
en
la
motivación
puede
garantizar
el
diseño
de
las
políticas
de
transición
adecuadas.
Un
obstáculo
potencial
para
una
transición
hacia
la
sostenibilidad
pueden
ser
las
barreras
de
comportamiento
para
el
cambio.
Los
diferentes
actores
involucrados
tienen
sus
propios
intereses
y
tratarán
de
mantener
cualquier
posición
de
poder.
Ideas
acerca
de
la
racionalidad
limitada,
la
interacción
social
y
el
aprendizaje
pueden
contribuir
a
unas
políticas
más
eficaces
en
afrontar
las
barreras
y
oportunidades
para
así
realizar
una
transición
hacia
la
sostenibilidad.
Con
el
fin
de
llegar
a
las
recomendaciones
políticas,
me
centro
en
las
características
de
comportamiento
tanto
a
nivel
de
organización
como
individual,
prestando
atención
a
cuestiones
como
el
monopolio
comercial,
imprevistos
en
los
sistemas
de
innovación
o
interacciones
de
red,
mientras
intento
conectar
dichas
cuestiones
para
el
diseño
de
políticas
públicas.
El
análisis
combina
puntos
de
vista
de
la
literatura
sobre
las
transiciones
de
sostenibilidad,
"economía
conductual-‐ambiental",
y
fundamentos
de
comportamiento
de
aprendizaje
e
innovación.
A
continuación,
analizo
el
conflicto
potencial
entre
crecimiento
económico
y
mitigación
del
cambio
climático.
Utilizo
un
enfoque
basado
en
los
sectores
economicos
para
analizar
la
relación
entre
las
emisiones
de
CO2,
por
un
lado
utilizando
el
dólar
de
producción
y
por
el
otro
el
crecimiento
de
la
producción
económica
y
la
productividad
del
trabajo.
Esto
nos
permite
investigar
si
el
crecimiento
verde
-‐
combinando
el
crecimiento
económico
con
la
sostenibilidad
ambiental
-‐
es
factible.
Una
conclusión
principal
es
que,
a
pesar
de
las
políticas
climáticas
realizadas
hasta
ahora,
desarrolladas
bajo
el
protocolo
de
Kyoto,
sectores
relativamente
limpios
no
parecen
ser
más
productivos
que
los
más
sucios,
y
tampoco
muestran
un
mayor
crecimiento
de
la
productividad.
De
hecho,
los
sectores
asociados
a
la
alta
intensidad
de
emisiones
crecieron
más
en
términos
absolutos
que
aquellos
con
baja
intensidad.
La
quota
del
primer
tipo
de
sector
aumentó,
lo
que
sugiere
que
el
desarrollo
verde
requiere
un
ritmo
extremadamente
rápido
de
descarbonización
(para
permitir
el
crecimiento
verde),
o
la
economía
en
su
conjunto
para
reducir
el
tamaño
(disminución
verde).
Un
hallazgo
importante
adicional
es
que
el
crecimiento
sectorial
a
largo
plazo,
tal
y
como
se
expresa
por
un
cambio
en
el
valor
añadido,
no
parece
estar
correlacionado
positivamente
con
la
intensidad
de
las
emisiones
de
carbono.
En
el
último
estudio,
examino
la
inversión
óptima
por
parte
de
una
sociedad
o
empresa
mediante
la
diversificación
de
la
inversión
en
dos
tecnologías
de
energía
renovable
con
distintas
ratios
de
aprendizaje
y
costes
iniciales,
como
la
energía
solar
fotovoltaica
y
la
energía
eólica.
Los
resultados
muestran
la
importancia
de
la
tasa
de
aprendizaje:
afecta
a
la
anticipación
sobre
la
opción
de
invertir
y
reduce
el
umbral
crítico
para
su
ejercicio
o
para
un
más
alto
coste
de
producción
inicial.
A
más
capital
invertido,
mayor
es
el
aprendizaje
que
estimula
el
ejercicio
temprano
de
la
opción
de
invertir,
debido
a
un
efecto
de
reducción
de
costes.
Una
mayor
incertidumbre
en
los
precios
de
la
energía
o
de
los
costes
de
la
tecnología
pospone
la
opción
de
invertir.
A
través
de
las
subvenciones,
los
gobiernos
implícitamente
protegen
a
los
inversores
contra
las
fluctuaciones
de
precios
y
la
incertidumbre.
Un
resultado
inesperado
de
este
estudio
es
que,
a
pesar
de
que
la
inversión
tanto
en
energía
solar
como
en
eólica
puede
ser
rentable
en
condiciones
particulares
de
incertidumbre
de
precios
y
costes,
la
estrategia
teóricamente
óptima
suele
ser
invertir
en
una
sola
tecnología,
es
decir,
en
solar
o
eólica,
en
función
de
sus
relativos
costes
y
ratios
de
aprendizaje
iniciales.
Esto
sugiere
que
la
práctica
de
la
diversificación
de
las
energías
renovables
en
la
mayoría
de
los
países
puede
ser
una
estrategia
equivocada.
Sin
embargo,
tal
vez
ciertas
motivaciones
para
la
diversificación
no
están
insuficientemente
cubiertas
por
nuestro
modelo,
por
lo
que
sugerimos
seguir
investigando
mediante
el
uso
de
modelos
más
complejos.It is widely agreed that a transition to sustainability is urgently needed. How to make such a transition is strongly debated. It is clear, though, that it will involve radical, large-scale socio-technical changes that go well beyond traditional policy approaches. This PhD thesis addresses this challenge through three distinct, complementary studies.
The first is motivated by the fact that the performance of transition policies – in terms of effectiveness, equity and efficiency – depend very much on the underlying model of individual behavior. Only an empirically founded model of individual action and motivation can guarantee the design of adequate transition policies. A potential obstacle to a sustainability transition can be behavioral barriers to change. The different stakeholders involved in a transition have their own interests and will try to maintain any power position. Insights about bounded rationality, social interaction and learning can contribute to making transition polices more effective in addressing barriers and opportunities to realize a sustainability transition. In order to arrive at policy recommendations I focus on behavioral features of both individual and organizational level, paying attention to issues like lock-in, surprises in innovation systems, and network interactions, while trying to connect these to policy design. The analysis combines insights from the literatures on sustainability transitions, “environmental-behavioral economics”, and behavioral foundations of learning and innovation.
Next, I consider the potential conflict between economic growth and climate change mitigation. This is done by developing a sector-based approach to analyze the relation between on the one hand CO2 emissions per dollar of output and on the other the growth in economic output and labor productivity. This allows us to investigate whether green growth – combining economic growth with environmental sustainability – is feasible. A main conclusion is that despite past climate policy, developed under the Kyoto protocol, relatively clean sectors do not seem to be more productive than dirtier ones, and neither show a higher productivity growth. In fact, sectors associated with high carbon intensity grew more in absolute terms than those with low carbon intensity. The share of the first type of sectors increased suggesting that green development requires an extremely rapid pace of decarbonization (to allow for green growth), or the economy as a whole to shrink (green decline). An important additional finding of this study is that longer-term sectoral growth, as expressed by a change in value added, does not seem to be positively correlated with carbon intensity.
In a final study I examine optimal investment by a community or firm diversifying its investment in two renewable energy technologies with distinct learning rates and initial costs, like solar PV and wind electricity. The results show the importance of the learning rate: it affects anticipation of the option to invest in, and it reduces the critical threshold for exercising it, or for higher initial production cost. More capital invested, more learning stimulates earlier exercising of the option to invest, due to a cost reduction effect. More uncertainty in energy prices or technology costs postpones the option to invest. Through subsidies, governments implicitly protect investors against price fluctuations and uncertainty. A surprising message from this study is that although investing in both solar and wind may be profitable under particular conditions of price and cost uncertainty, the theoretically optimal strategy is generally investing in only one technology, that is, solar or wind, depending on their relative initial costs and learning rates. This suggests that the practice in most countries of diversifying renewable energy may be a wrong strategy. However, perhaps certain motivations for diversifying are not or insufficiently covered by our model, which suggests a need for further research employing more complex models
Achieving sustainability transitions: Behavioral barriers, limits to green growth, and investments under uncertainty
Está
ampliamente
aceptado
que
es
necesaria
una
transición
urgente
hacia
la
sostenibilidad.
El
cómo
hacer
esa
transición
está
intensamente
en
discusión.
Está
claro,
sin
embargo,
que
implicará
grandes
cambios
radicales,
socio-‐técnicos,
que
van
mucho
más
allá
de
enfoques
tradicionales
de
políticas
públicas.
Esta
tesis
doctoral
aborda
este
reto
a
través
de
tres
estudios
distintos
y
complementarios.
El
primer
estudio
está
motivado
por
el
hecho
de
que
las
políticas
de
transición
-‐
en
términos
de
eficacia,
equidad
y
eficiencia
-‐
dependen
en
gran
medida
del
modelo
subyacente
de
la
conducta
individual.
Sólo
un
modelo
empíricamente
fundado
en
la
acción
individual
y
en
la
motivación
puede
garantizar
el
diseño
de
las
políticas
de
transición
adecuadas.
Un
obstáculo
potencial
para
una
transición
hacia
la
sostenibilidad
pueden
ser
las
barreras
de
comportamiento
para
el
cambio.
Los
diferentes
actores
involucrados
tienen
sus
propios
intereses
y
tratarán
de
mantener
cualquier
posición
de
poder.
Ideas
acerca
de
la
racionalidad
limitada,
la
interacción
social
y
el
aprendizaje
pueden
contribuir
a
unas
políticas
más
eficaces
en
afrontar
las
barreras
y
oportunidades
para
así
realizar
una
transición
hacia
la
sostenibilidad.
Con
el
fin
de
llegar
a
las
recomendaciones
políticas,
me
centro
en
las
características
de
comportamiento
tanto
a
nivel
de
organización
como
individual,
prestando
atención
a
cuestiones
como
el
monopolio
comercial,
imprevistos
en
los
sistemas
de
innovación
o
interacciones
de
red,
mientras
intento
conectar
dichas
cuestiones
para
el
diseño
de
políticas
públicas.
El
análisis
combina
puntos
de
vista
de
la
literatura
sobre
las
transiciones
de
sostenibilidad,
"economía
conductual-‐ambiental",
y
fundamentos
de
comportamiento
de
aprendizaje
e
innovación.
A
continuación,
analizo
el
conflicto
potencial
entre
crecimiento
económico
y
mitigación
del
cambio
climático.
Utilizo
un
enfoque
basado
en
los
sectores
economicos
para
analizar
la
relación
entre
las
emisiones
de
CO2,
por
un
lado
utilizando
el
dólar
de
producción
y
por
el
otro
el
crecimiento
de
la
producción
económica
y
la
productividad
del
trabajo.
Esto
nos
permite
investigar
si
el
crecimiento
verde
-‐
combinando
el
crecimiento
económico
con
la
sostenibilidad
ambiental
-‐
es
factible.
Una
conclusión
principal
es
que,
a
pesar
de
las
políticas
climáticas
realizadas
hasta
ahora,
desarrolladas
bajo
el
protocolo
de
Kyoto,
sectores
relativamente
limpios
no
parecen
ser
más
productivos
que
los
más
sucios,
y
tampoco
muestran
un
mayor
crecimiento
de
la
productividad.
De
hecho,
los
sectores
asociados
a
la
alta
intensidad
de
emisiones
crecieron
más
en
términos
absolutos
que
aquellos
con
baja
intensidad.
La
quota
del
primer
tipo
de
sector
aumentó,
lo
que
sugiere
que
el
desarrollo
verde
requiere
un
ritmo
extremadamente
rápido
de
descarbonización
(para
permitir
el
crecimiento
verde),
o
la
economía
en
su
conjunto
para
reducir
el
tamaño
(disminución
verde).
Un
hallazgo
importante
adicional
es
que
el
crecimiento
sectorial
a
largo
plazo,
tal
y
como
se
expresa
por
un
cambio
en
el
valor
añadido,
no
parece
estar
correlacionado
positivamente
con
la
intensidad
de
las
emisiones
de
carbono.
En
el
último
estudio,
examino
la
inversión
óptima
por
parte
de
una
sociedad
o
empresa
mediante
la
diversificación
de
la
inversión
en
dos
tecnologías
de
energía
renovable
con
distintas
ratios
de
aprendizaje
y
costes
iniciales,
como
la
energía
solar
fotovoltaica
y
la
energía
eólica.
Los
resultados
muestran
la
importancia
de
la
tasa
de
aprendizaje:
afecta
a
la
anticipación
sobre
la
opción
de
invertir
y
reduce
el
umbral
crítico
para
su
ejercicio
o
para
un
más
alto
coste
de
producción
inicial.
A
más
capital
invertido,
mayor
es
el
aprendizaje
que
estimula
el
ejercicio
temprano
de
la
opción
de
invertir,
debido
a
un
efecto
de
reducción
de
costes.
Una
mayor
incertidumbre
en
los
precios
de
la
energía
o
de
los
costes
de
la
tecnología
pospone
la
opción
de
invertir.
A
través
de
las
subvenciones,
los
gobiernos
implícitamente
protegen
a
los
inversores
contra
las
fluctuaciones
de
precios
y
la
incertidumbre.
Un
resultado
inesperado
de
este
estudio
es
que,
a
pesar
de
que
la
inversión
tanto
en
energía
solar
como
en
eólica
puede
ser
rentable
en
condiciones
particulares
de
incertidumbre
de
precios
y
costes,
la
estrategia
teóricamente
óptima
suele
ser
invertir
en
una
sola
tecnología,
es
decir,
en
solar
o
eólica,
en
función
de
sus
relativos
costes
y
ratios
de
aprendizaje
iniciales.
Esto
sugiere
que
la
práctica
de
la
diversificación
de
las
energías
renovables
en
la
mayoría
de
los
países
puede
ser
una
estrategia
equivocada.
Sin
embargo,
tal
vez
ciertas
motivaciones
para
la
diversificación
no
están
insuficientemente
cubiertas
por
nuestro
modelo,
por
lo
que
sugerimos
seguir
investigando
mediante
el
uso
de
modelos
más
complejos.It is widely agreed that a transition to sustainability is urgently needed. How to make such a transition is strongly debated. It is clear, though, that it will involve radical, large-scale socio-technical changes that go well beyond traditional policy approaches. This PhD thesis addresses this challenge through three distinct, complementary studies.
The first is motivated by the fact that the performance of transition policies – in terms of effectiveness, equity and efficiency – depend very much on the underlying model of individual behavior. Only an empirically founded model of individual action and motivation can guarantee the design of adequate transition policies. A potential obstacle to a sustainability transition can be behavioral barriers to change. The different stakeholders involved in a transition have their own interests and will try to maintain any power position. Insights about bounded rationality, social interaction and learning can contribute to making transition polices more effective in addressing barriers and opportunities to realize a sustainability transition. In order to arrive at policy recommendations I focus on behavioral features of both individual and organizational level, paying attention to issues like lock-in, surprises in innovation systems, and network interactions, while trying to connect these to policy design. The analysis combines insights from the literatures on sustainability transitions, “environmental-behavioral economics”, and behavioral foundations of learning and innovation.
Next, I consider the potential conflict between economic growth and climate change mitigation. This is done by developing a sector-based approach to analyze the relation between on the one hand CO2 emissions per dollar of output and on the other the growth in economic output and labor productivity. This allows us to investigate whether green growth – combining economic growth with environmental sustainability – is feasible. A main conclusion is that despite past climate policy, developed under the Kyoto protocol, relatively clean sectors do not seem to be more productive than dirtier ones, and neither show a higher productivity growth. In fact, sectors associated with high carbon intensity grew more in absolute terms than those with low carbon intensity. The share of the first type of sectors increased suggesting that green development requires an extremely rapid pace of decarbonization (to allow for green growth), or the economy as a whole to shrink (green decline). An important additional finding of this study is that longer-term sectoral growth, as expressed by a change in value added, does not seem to be positively correlated with carbon intensity.
In a final study I examine optimal investment by a community or firm diversifying its investment in two renewable energy technologies with distinct learning rates and initial costs, like solar PV and wind electricity. The results show the importance of the learning rate: it affects anticipation of the option to invest in, and it reduces the critical threshold for exercising it, or for higher initial production cost. More capital invested, more learning stimulates earlier exercising of the option to invest, due to a cost reduction effect. More uncertainty in energy prices or technology costs postpones the option to invest. Through subsidies, governments implicitly protect investors against price fluctuations and uncertainty. A surprising message from this study is that although investing in both solar and wind may be profitable under particular conditions of price and cost uncertainty, the theoretically optimal strategy is generally investing in only one technology, that is, solar or wind, depending on their relative initial costs and learning rates. This suggests that the practice in most countries of diversifying renewable energy may be a wrong strategy. However, perhaps certain motivations for diversifying are not or insufficiently covered by our model, which suggests a need for further research employing more complex models
Land-use Change and Solar Energy Production: A Real Option Approach
In this paper a real option model is developed to examine the critical factors affecting the decision to lease agricultural land to a company installing a PV power plant. The leasing payment is certain while the net revenues from agriculture are uncertain. We identify the profit values at which the farmer decides to lease his plot vs. continue farming it. By applying the model to the province of Bologna (Italy), we illustrate the possible land-use change scenarios in this area. We conclude by discussing the importance of PV energy production as a source of income for farmers and its implications from a social perspective
Land-use change and solar energy production: A real option approach
Purpose – In this paper, a real option model is developed to examine the critical factors affecting the decision to lease agricultural land to a company installing a PV power plant. Subsidies introduced by governments for the production of renewable energies have increased the investments in this sector. Since ground-based solar cells need land for energy production, then potential trade-off with agriculture in terms of land exists. The paper aims to discuss these issues. Design/methodology/approach – The paper uses the real option approach in order to take into account for uncertainty and irreversibility of the farmer’s decision. Findings – By applying the model to the province of Bologna (Italy), the paper illustrates the possible land-use change scenarios in this area. The paper concludes by discussing the importance of PV energy production as a source of income for farmers and its implications from a social perspective. Originality/value – The research is applied to the province of Bologna (Italy) where investments in ground-based solar cells are becoming quite common. The originality lies in the fact of considering the investment as irreversible, since it is a 20-year commitment from the farmers. The paper also takes into account the uncertainty in agricultural commodities’ prices
Real options analysis of investment in solar vs. wind energy: Diversification strategies under uncertain prices and costs
In this paper we study a community or firm considering to diversify its investment in two distinct renewable energy technologies, namely wind and solar PV electricity. We assume technological learning curves as a function of cumulative capital investment. A real options approach is applied as it takes into account uncertainty about prices and learning, as well as irreversibility associated with investment decisions. We investigate three different cases, dealing with uncertainty about future electricity prices, and uncertainty about the speed with which learning drives the costs of wind and solar electricity down. We assess the minimum threshold for the stochastic price and the maximum electricity production cost that makes it optimal for the firm to invest in the two technologies. The results show that the learning rate affects the option to invest in but reducing critical threshold for exercising it. The greater the amount of capital invested, the more learning stimulates earlier exercising of the option to invest. The firm will then anticipate the option to invest and exercise it for lower critical threshold values if all capital is invested in one technology. If capital investment is diversified, the option should be exercised at a higher critical threshold. More uncertainty in energy prices or technology costs postpones the option to invest. Although investing in both solar and wind may be profitable under particular conditions of price and cost uncertainty, the theoretically optimal strategy is generally investing in only one technology, that is, solar or wind, depending on their relative initial costs and learning rates. This suggests that the practice in most countries of diversifying renewable energy may reflect a mistaken strategy
Investing in energy forestry under uncertainty
Farmer's decisions to invest in renewable energy sources can contribute to lower greenhouse gas and mitigate climate change. However, it remains unclear how associated high sunk establishment costs, long-term commitment, highly uncertain net returns, and policy induced incentives could drive farmer's decision to afforest agricultural land. A real option model is used to theoretically frame the decision to switch from agriculture to energy forestry. Optimal investment timing is modeled and the functioning of government subsidies offered to speed up the switch to energy forestry is analyzed. The empirical analysis examines the establishment of new short-rotation coppice willow stands in Central East Sweden. It is shown that in the presence of volatile agricultural profits and high establishment costs, subsidies are needed to accelerate investment. We then examine the case of the municipality of Enköping and show that the combination of governmental subsidies for energy forestry with compensation for sewage sludge treatment provides an effective stimulus to investment in new willow stands which also has environmental benefits. © 2013 Elsevier B.V