University of Cambridge
Role at Tyndall
Duration of your PhD
My Thesis' Abstract
Investment and technological transitions under climate change policy uncertainty in the energy sector.
The high uncertainty surrounding future climate change mitigation policies generates additional perceived risk associated to the investment in the energy sector and consequently has a negative impact on potential flows of capital necessary to generate reductions in carbon emissions, through the incorporation of cleaner energy production technologies. Therefore, in order to quantify the impact that climate policy uncertainty has on investment in energy technology and subsequently on the technology transitions, it is necessary to understand how the decisions process of investors works. In order to do so, the porposed thesis will model investors behaviour using up-to-date methodologies, such as Brownian motion processes to model volatility in prices, Monte Carlo simulations to analyse large number of variations in stochastic input variables and real options valuation to find the best investment strategies given limited information about the future.
In the same way that investment cannot be analysed independently from energy technology evolution, the development of the energy sector should not be studied separately from the rest of the economy. For that reason, the proposed thesis will analyse the effect of climate change policy uncertainty over investment in the energy sector using two models: FTT Power (an energy technology substitution model recently developed at 4CMR, which simulates the technological evolution of the energy sector assuming endogenous investment, given exogenous climate policy) and E3MG (a disaggregated global macro-econometric model, developed by Prof. Terry Barker). FTT Power will be modified in order to incorporate climate policy uncertainty as well as other stochastic variables.