Biodiesel investment in a disruptive tax-credit policy environment
Liu, S; Colson, G; Wetzstein, M
| HERO ID | 10285683 |
|---|---|
| In Press | No |
| Year | 2018 |
| Title | Biodiesel investment in a disruptive tax-credit policy environment |
| Authors | Liu, S; Colson, G; Wetzstein, M |
| Journal | Energy Policy |
| Volume | 123 |
| Page Numbers | 19-30 |
| Abstract | An investigation of Poisson type policy jumps on biodiesel investment considers the theory of investment under uncertainty. The analysis studies the probability of implementing a policy if it is not in effect and the probability of withdrawal if it is in effect. An application models the policy-switching regime of the discontinuous U.S. federal tax credit of $1.00 per gallon on biodiesel. Results support that time inconsistent government policies do lead to market uncertainty. The analysis reveals a pronounced negative impact on decisions to invest in a biodiesel refinery. Results do indicate a consistent policy-switching regime may not be that disruptive to the emerging biodiesel industry. It is policy uncertainty that drives the option-pricing thresholds and a consistent policy switching does not increase the uncertainty. |
| Doi | 10.1016/j.enpol.2018.08.026 |
| Wosid | WOS:000453499700003 |
| Is Certified Translation | No |
| Dupe Override | No |
| Is Public | Yes |
| Language Text | English |
| Keyword | Biodiesel investment; Disruptive biodiesel policy; Poisson policy jumps; Real options |