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Article

Investment Decisions of Fired Power Plants on Carbon Utilization under the Imperfect Carbon Emission Trading Schemes in China

by 1,2 and 3,4,*
1
Research Center for Economy of Upper Reaches of the Yangtze River, Chongqing Technology and Business University, Chongqing 400067, China
2
School of Finance, Chongqing Technology and Business University, Chongqing 400067, China
3
Business School, Southwest University of Political Science and Law, Chongqing 401120, China
4
Research Institute of Enterprise Governed by Law in China, Southwest University of Political Science and Law, Chongqing 401120, China
*
Author to whom correspondence should be addressed.
Processes 2019, 7(11), 828; https://doi.org/10.3390/pr7110828
Received: 28 September 2019 / Revised: 1 November 2019 / Accepted: 4 November 2019 / Published: 7 November 2019
(This article belongs to the Special Issue Energy, Economic and Environment for Industrial Production Processes)
Carbon capture, utilization, and storage (CCUS) is one of the most effective technologies to reduce CO2 emissions and has attracted wide attention all over the world. This paper proposes a real option model to analyze the investment decisions of a coal-fired power plant on CCUS technologies under imperfect carbon emission trading schemes in China. Considering multiple uncertainties, which include carbon trading price volatility, carbon utilization revenue fluctuation, and changes in carbon transport and storage cost, the least squares Monte Carlo simulation method is used to solve the problems of path dependence. The research results show that the independent effects of carbon trading mechanisms on investment stimulation and emission reduction are limited. The utilization ratio of captured CO2 has significant impacts on the net present value and investment value of the CCUS project. Moreover, the investment threshold is highly sensitive to the utilization proportion of food grade CO2 with high purity. It is suggested that the Chinese government should take diverse measures simultaneously, including increasing grants for research and development of carbon utilization technologies, introducing policies to motivate investments in CCUS projects, and also improving the carbon emission trading scheme, to ensure the achievement of the carbon emission reduction target in China. View Full-Text
Keywords: carbon utilization; carbon emission trading scheme; investment decision; real option carbon utilization; carbon emission trading scheme; investment decision; real option
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MDPI and ACS Style

Zhang, W.; Liu, L. Investment Decisions of Fired Power Plants on Carbon Utilization under the Imperfect Carbon Emission Trading Schemes in China. Processes 2019, 7, 828. https://doi.org/10.3390/pr7110828

AMA Style

Zhang W, Liu L. Investment Decisions of Fired Power Plants on Carbon Utilization under the Imperfect Carbon Emission Trading Schemes in China. Processes. 2019; 7(11):828. https://doi.org/10.3390/pr7110828

Chicago/Turabian Style

Zhang, Weiwei, and Linlin Liu. 2019. "Investment Decisions of Fired Power Plants on Carbon Utilization under the Imperfect Carbon Emission Trading Schemes in China" Processes 7, no. 11: 828. https://doi.org/10.3390/pr7110828

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