CICERO - Center for International Climate Research
Energy Food and forests Climate finance Local Solutions China The Arctic ​International Climate Policy

Investment under uncertainty: EUs renewable energy and climate policy beyond 2020

The prospects for EU renewable energy and climate policies beyond 2020 are uncertain. Investors and policy makers in Norway and abroad need knowledge on how to make decisions under this uncertainty. Firms' decisions under uncertainty can be formulated as a real option problem in which the option to delay an irreversible decision has a value. Policy as well as market uncertainty will affect this value. We derive decision rules. These rules can be used to form better forecasts of the power sector’s decisions, and to assess the social welfare cost of different policy designs and uncertain political processes.

The project is funded by the EnergiX program at Research Council of Norway and the project period is 2013-2016. It is managed by professor Stein-Erik Fleten at NTNU. Other academic partners are CICERO, University College London and University of Copenhagen. The stakeholder group consists of NVE, Energi Norge, Nord-Trøndelag Energi og Statnett.