| ID | 162332 |
| Title Proper | Biodiesel investment in a disruptive tax-credit policy environment |
| Language | ENG |
| Author | Liu, Shen |
| Summary / Abstract (Note) | 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. |
| `In' analytical Note | Energy Policy Vol. 123; Dec 2018: p.19-30 |
| Journal Source | Energy Policy 2018-12 123 |
| Key Words | Real Options ; Biodiesel Investment ; Disruptive Biodiesel Policy ; Poisson Policy ; Jumps |