Curtin University Homepage
  • Library
  • Help
    • Admin

    espace - Curtin’s institutional repository

    JavaScript is disabled for your browser. Some features of this site may not work without it.
    View Item 
    • espace Home
    • espace
    • Curtin Research Publications
    • View Item
    • espace Home
    • espace
    • Curtin Research Publications
    • View Item

    The effect of political cycles on power investment decisions: Expectations over the repeal and reinstatement of carbon policy mechanisms in Australia

    202820_202820.pdf (808.1Kb)
    Access Status
    Open access
    Authors
    Shahnazari, M.
    McHugh, A.
    Maybee, Bryan
    Whale, J.
    Date
    2014
    Type
    Journal Article
    
    Metadata
    Show full item record
    Citation
    Shahnazari, M. and McHugh, A. and Maybee, B. and Whale, J. 2014. The effect of political cycles on power investment decisions: Expectations over the repeal and reinstatement of carbon policy mechanisms in Australia. Applied Energy. 130: pp. 157-165.
    Source Title
    Applied Energy
    DOI
    10.1016/j.apenergy.2014.05.040
    ISSN
    0306-2619
    School
    Graduate School of Business
    URI
    http://hdl.handle.net/20.500.11937/41424
    Collection
    • Curtin Research Publications
    Abstract

    Political uncertainty over global greenhouse gas (GHG) mitigation policy is likely to defer investment in cleaner technologies. It may also incentivise short-lived, high-cost interim investments while businesses wait for the uncertainty to subside. The range of possible policy responses to the issue has created uncertainty over the future of national mitigation pathways. Given that the electricity sector, globally, is a major emitter of GHGs, this represents a systematic risk to investment in electricity generation assets. This paper uses a real options analysis framework informed by a survey of experts conducted in Australia – used as a proxy to model the degree of the uncertainty – to investigate the optimal timing for investment in the conversion of a coal plant to a combined cycle gas turbine plant using the American-style option valuation method. The effect of market and political uncertainty is studied for the Clean Energy Act 2011 in Australia. Political uncertainty is addressed bi-modally in terms of: (1) uncertainty over the repeal of the carbon pricing policy, and (2) if it is repealed, uncertainty over the reinstatement of the policy, to represent the effect of electoral cycles and the possibility of more stringent future global mitigation efforts. Results of the analysis show that although political uncertainty with respect to GHG mitigation policy may delay investment in the conversion of the coal plant, expectations over the reinstatement of the carbon pricing reduces the amount of option premium to defer the conversion decision.

    Related items

    Showing items related by title, author, creator and subject.

    • Overlapping carbon pricing and renewable support schemes under political uncertainty: Global lessons from an Australian case study
      Shahnazari, M.; McHugh, A.; Maybee, Bryan; Whale, J. (2017)
      The translation of a greenhouse gas (GHG) emissions reduction policy objective to the required investment in low emissions technologies may be hindered by political contest over the policy instruments employed to achieve ...
    • Evaluation of power investment decisions under uncertain carbon policy: A case study for converting coal fired steam turbine to combined cycle gas turbine plants in Australia
      Shahnazari, M.; McHugh, A.; Maybee, Bryan; Whale, J. (2013)
      Greenhouse gas (GHG) intensive fuels are currently a major input into the Australian electricity sector. Accordingly, climate change mitigation policies represent a systematic risk to investment in electricity generation ...
    • Better the devil you know: The Influence of Political Incumbency on Australian Financial Market Uncertainty
      Smales, Lee (2015)
      The Australian federal election cycle, which occurs approximately every 3 years, causes much media attention and invokes indecision regarding investment decisions in both the real economy and financial markets. This paper ...
    Advanced search

    Browse

    Communities & CollectionsIssue DateAuthorTitleSubjectDocument TypeThis CollectionIssue DateAuthorTitleSubjectDocument Type

    My Account

    Admin

    Statistics

    Most Popular ItemsStatistics by CountryMost Popular Authors

    Follow Curtin

    • 
    • 
    • 
    • 
    • 

    CRICOS Provider Code: 00301JABN: 99 143 842 569TEQSA: PRV12158

    Copyright | Disclaimer | Privacy statement | Accessibility

    Curtin would like to pay respect to the Aboriginal and Torres Strait Islander members of our community by acknowledging the traditional owners of the land on which the Perth campus is located, the Whadjuk people of the Nyungar Nation; and on our Kalgoorlie campus, the Wongutha people of the North-Eastern Goldfields.