Balancing Risks from Climate Policy Uncertainties: The Role of Options and Reduced Emissions from Deforestation and Forest Degradation
| Autor: | Alexander Golub, Pedro Piris-Cabezas, Ruben N. Lubowski |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Economics and Econometrics
Operationalization business.industry Natural resource economics 020209 energy media_common.quotation_subject 05 social sciences Environmental resource management 02 engineering and technology Investment (macroeconomics) Deforestation Scale (social sciences) 0502 economics and business Private finance initiative 0202 electrical engineering electronic engineering information engineering Conceptual model Economics 050202 agricultural economics & policy Emissions trading business Hedge (finance) General Environmental Science media_common |
| Zdroj: | Ecological Economics. 138:90-98 |
| ISSN: | 0921-8009 |
| DOI: | 10.1016/j.ecolecon.2017.03.013 |
| Popis: | Progressively adjusting climate policies will entail adjustment costs for society. This paper develops a conceptual model and numerical example that illustrate the risk associated with exposure to the high costs of complying with future emissions controls and how this risks trades off against that from potentially premature investment into abatement. We then highlight the potentially unique role of tropical forest protection in helping to manage these risks by providing a cost-effective “buffer” of near term emissions reductions at a globally significant scale. This buffer would provide insurance against the risk of suddenly tightening targets, as well as providing other critical environmental benefits. We further examine how a version of a private finance instrument in the form of long-dated ‘call’ options on verified reductions in emissions from deforestation and forest degradation (i.e. REDD +) can help to operationalize this risk-hedging buffer creation. Options on REDD + could aid both regulated businesses and tropical nations to manage their respective risks. REDD + options could deliver sufficient abatement to significantly hedge exposure of regulated entities to potential corrections in climate policy while channeling financial resources to defer deforestation even as climate policies continue to evolve. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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