Open Access
Brown price and green firms : an ETS price floor for a clean transition?
Loading...
Files
Brown_price_2025.pdf (6.82 MB)
Full-text in Open Access, Published version
License
Attribution 4.0 International
Cadmus Permanent Link
Full-text via DOI
ISBN
ISSN
1573-1502; 0924-6460
Issue Date
Type of Publication
Keyword(s)
LC Subject Heading
Other Topic(s)
EUI Research Cluster(s)
Initial version
Published version
Succeeding version
Preceding version
Published version part
Earlier different version
Initial format
Citation
Environmental and resource economics, 2025, OnlineFirst
[Florence School of Regulation]; [Climate]
Cite
BORGHESI, Simone, COMINCIOLI, Nicola, KORT, Peter M., THIJSSEN, Jacco J.J., VERGALLI, Sergio, Brown price and green firms : an ETS price floor for a clean transition?, Environmental and resource economics, 2025, OnlineFirst, [Florence School of Regulation], [Climate] - https://hdl.handle.net/1814/78261
Abstract
We examine the optimal behavior of carbon-emitting companies operating under the European Union Emission Trading System (EU ETS), under which firms are obliged to purchase emission permits on the secondary market if their emissions exceed their allowance. Specifically, we consider the scenario where firms are endowed with the (real) option to undertake a “green” investment to cut their emissions and, thus, permit expenditures. The central challenge is the determination of the optimal time for investment within a stochastic framework characterized by uncertainty in EU ETS permit prices. We address the problem for a heterogeneous group of companies with diverse technological capabilities across industrial sectors. Furthermore, we incorporate a price floor for permit prices to mirror policy efforts aimed at promoting green transition by elevating emission costs. We solve this problem analytically and through numerical simulations calibrated to real market data. In addition to offering insights into individual firm behavior, our findings can support regulators in refining environmental policies, particularly regarding the role of permits price floor and its potential to expedite the green transition.
Table of Contents
Additional Information
Published online: 02 April 2025
External Links
Publisher
Version
Research Projects
Sponsorship and Funder Information
This article was published Open Access with the support from the EUI Library through the CRUI - Springer Transformative Agreement (2020-2024). Agreement extended and set to expire on 30 June 2025.