Long Term Dynamics in CO2 Allowance Prices and Carbon Capture Investments

In this paper we analyse the behaviour of the EU market for CO2 emission allowances; specifically, we focus on the contracts maturing in the Kyoto Protocol's second period of application (2008 to 2012). We calibrate the underlying parameters for the allowance price in the long run and we also calibrate those from the Spanish wholesale electricity market. This information is then used to assess the option to install a carbon capture and storage (CCS) unit in a coal-fired power plant. We use a two-dimensional binomial lattice where costs and profits are valued and the optimal investment time is determined. In other words, we study the trigger allowance prices above which it is optimal to install the capture unit immediately. We further analyse the impact of several variables on the critical prices, among them allowance price volatility and a hypothetical government subsidy. We conclude that, at current permit prices, from a financial point of view, immediate installation does not seem justified. This need not be the case, though, if carbon market parameters change dramatically and/or a specific policy to promote these units is adopted.

Monte Carlo Valuation of natural gas investments

This paper deals with the valuation of energy assets related to natural gas. In particular, we evaluate a baseload Natural Gas Combined Cycle (NGCC) power plant and an ancillary instalation, namely a Liquefied Natural Gas (LNG) facility, in a realistic setting; specifically, these investments enjoy a long useful life but require some non-negligible time to build. Then we focus on the valuation of several investment options again in a realistic setting. These include the option to invest in the power plant when there is uncertainty concerning the initial outlay, or the option's time to maturity, or the cost of CO2 emission permits, or when there is a chance to double the plant size in the future. Our model comprises three sources of risk. We consider uncertain gas prices with regard to both the current level and the long-run equilibrium level; the current electricity price is also uncertain. They all are assumed to show mean reversion. The two-factor model for natural gas price is calibrated using data from NYMEX NG futures contracts. Also, we calibrate the one-factor model for electricity price using data from the Spanish wholesale electricity market, respectively. Then we use the estimated parameter values alongside actual physical parameters from a case study to value natural gas plants. Finally, the calibrated parameters are also used in a Monte Carlo simulation framework to evaluate several American-type options to invest in these energy assets. We accomplish this by following the least squares MC approach.

Income risk of EU coal-fired power plants after Kyoto

Coal-fired power plants may enjoy a significant advantage relative to gas plants in terms of cheaper fuel cost. Still, this advantage may erode or even turn into disadvantage depending on CO2 emission allowance price. This price will presumably rise in both the Kyoto Protocol commitment period (2008-2012) and the first post-Kyoto years. Thus, in a carbon-constrained environment, coal plants face financial risks arising in their profit margins, which in turn hinge on their so-called "clean dark spread". These risks are further reinforced when the price of the output electricity is determined by natural gas-fired plants' marginal costs, which differ from coal plants' costs. We aim to assess the risks in coal plants' margins. We adopt parameter values estimated from empirical data. These in turn are derived from natural gas and electricity markets alongside the EU ETS market where emission allowances are traded. Monte Carlo simulation allows to compute the expected value and risk profile of coal-based electricity generation. We focus on the clean dark spread in both time periods under different future scenarios in the allowance market. Specifically, bottom 5% and 10% percentiles are derived. According to our results, certain future paths of the allowance price may impose significant risks on the clean dark spread obtained by coal plants.

Impact of fertlizers and pesticides on soil and water quality

[ES]En la presente tesis se ha estudiado el impacto de diferentes fertilizantes y pesticidas utilizados en la Zona Vulnerable de Vitoria-Gasteiz en la calidad del suelo y las aguas de dicha zona. Se ha podido constatar que hoy en día siguen lixiviándose cantidades significativas de nitratos y pesticidas (e.g., etofumesato y difenoconazol) a las aguas de la Zona Vulnerable, durante el cultivo de remolacha azucarera (Beta vulgaris L.), muy característico de la zona de estudio. Se comprobó que el alto contenido en nitratos de las aguas subterráneas en la Zona Vulnerable es mitigado, al menos en parte, por la acción de la actividad microbiana desnitrificante que alberga la zona riparia del humedal de Salburua. Dicho proceso, sin embargo, supone la emisión a la atmósfera de importantes cantidades de gases de efecto invernadero (CO2 y N2O), y puede verse afectado negativamente por la presencia de pesticidas (e.g., deltametrina) en el medio.Por otra parte, hemos observado que diversos pesticidas (deltametrina, etofumesato, difenoconazol) aplicados en concentraciones similares a las dosis de aplicación en campo inducen cambios, de carácter limitado y transitorio, en las comunidades microbianas edáficas, siendo más significativos en el caso del fungicida difenoconazol. El efecto de los pesticidas fue más acusado a medida que aumentaba su concentración en el medio. Finalmente, encontramos que la aplicación de abonos orgánicos (avicompost), en lugar de los fertilizantes sintéticos tradicionales (NPK), además de mejorar la degradación de los pesticidas y disminuir el impacto de éstos sobre la calidad del suelo, podría ayudar a reducir las pérdidas de nitratos por lixiviación.

Breaking the 400 ppm barrier: Physical and Social implications of the recent CO2 rise

6 p.

Rompiendo la barrera de las 400 ppm: implicaciones físicas y sociales del reciente aumento de CO2

6 p.

400 ppm-ko langa hautsi da: CO2-kontzentrazioaren igoeraren ondorio fisiko eta sozialak

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Market Instruments and CO2 Mitigation: A General Equilibrium Analysis for Spain

25 p.