Option values of low carbon technologies policies

How to combine irreversibility effect and learning-by-doing in decisions?

Abstract : in this paper we analyze the development and deployment of largescale low carbon technologies. We first review several issues at stake for the development of a technology still in infancy and characterized by major learning effects. Then we develop an analytical model to analyze the interrelation between irreversible investments and learning effects within a context of uncertainty. Whereas the irreversibility effect usually justifies limiting irreversible investment in a context of uncertainty, we show that this result can be reversed in presence of learning effects. Learning effects can justify the early development of a technology in order to have the technology ready to face intermediate objectives which will appear essential in order to reach CO2 emissions reductions targets.

This entry was posted in Working Paper. Bookmark the permalink.

Comments are closed.