Regulated correlations — climate policy and investment risks
研究了碳税和排放交易等气候政策对发电厂利润波动的影响，发现风险厌恶会改变技术投资组合，导致排放交易减排效果弱于碳税，但碳税的福利成本随风险厌恶上升。
Investments in energy technologies are substantially governed by climate policy. We demonstrate analytically that price-based instruments, such as carbon-taxes, and quantity-based regulations, like emission trading, have distinct effects on the (co-) variance of power plant profits. If investors are risk-averse, this leads to divergent technology portfolios, breaking the equivalence of price- and quantity-based policy instruments under risk-neutrality. Using a calibrated stochastic electricity market model, risk aversion leads to lower baseline emissions, causing emissions trading to reduce less emissions than a carbon tax equivalent under risk neutrality. However, the welfare costs of carbon taxes rise with increasing risk aversion. Uncertainty about the stringency of carbon taxes leads to lower shares of fossil fuel assets with increasing risk aversion.