Climate policy uncertainty and investment risk

  • 31/12/2006

  • International Energy Agency

This book identifies how climate change policy uncertainty may affect investment behaviour in the power sector. For power companies, where capital stock is intensive and long-lived, those risks rank among the biggest and can create an incentive to delay investment. The analysis results show that the risk premiums of climate change uncertainty can add 40% of construction costs of the plant for power investors, and 10% of price surcharges for the electricity end-users. This book also tells what can be done in policy design to reduce these costs.
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