Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations

Investments in large, long-lived, energy-intensive infrastructure investments using fossil fuels increase longer-term energy use and greenhouse gas emissions, unless the plant is shut down early or undergoes costly retrofit later. These investments...

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Main Authors:	Strand, Jon, Miller, Sebastian, Siddiqui, Sauleh
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ABATEMENT POLICIES APPROACH ATMOSPHERE AVAILABILITY BALANCE CAPITAL COST CARBON CAPTURE CARBON DIOXIDE CARBON DIOXIDE EMISSIONS CARBON EMISSIONS CARBON TAXES CLIMATE CLIMATE CHANGE CLIMATE POLICY CO2 CONSUMPTION OF FOSSIL COST OF CARBON COST-BENEFIT DEMAND ELASTICITY DEMAND FOR ENERGY DEVELOPMENT ECONOMICS DEW DISCOUNT RATE DISCOUNT RATES DISTRIBUTION OF ENERGY ECONOMIC ANALYSIS ELASTICITY OF DEMAND EMISSION EMISSION ABATEMENT EMISSIONS CONTROL EMISSIONS INTENSITY EMISSIONS PRICES ENERGY CONSUMPTION ENERGY COST SAVINGS ENERGY COSTS ENERGY DEMAND ENERGY ECONOMICS ENERGY EFFICIENCY ENERGY EXPENDITURES ENERGY INTENSIVE ENERGY POLICIES ENERGY POLICY ENERGY PRICE ENERGY PRICES ENERGY REQUIREMENT ENERGY SOURCES ENERGY SUPPLY ENERGY TAXES ENERGY TECHNOLOGIES ENERGY TECHNOLOGY ENERGY USE ENVIRONMENTAL COSTS ENVIRONMENTAL ECONOMICS FINANCIAL SUPPORT FOSSIL FOSSIL ENERGY FOSSIL ENERGY USE FOSSIL FUEL FOSSIL FUELS FUEL FUEL CONSUMPTION FUEL COSTS FUTURE PRICES GHG GHGS GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS MITIGATION GREENHOUSE GASES HIGH ENERGY INTENSITY HIGHER ENERGY CONSUMPTION INCOME INFRASTRUCTURE INVESTMENT LOW-CARBON LOWER COSTS LOWER PRICE MARGINAL COST MARGINAL UTILITY MARKET FAILURE POLICY MAKERS PP PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASE REDUCTION IN ENERGY CONSUMPTION RENEWABLE ENERGY RESOURCE ECONOMICS RETROFIT OPTION RETROFITTING RISK AVERSION SCENARIOS STOCHASTIC PROCESS SUBSTITUTION SUPPLY COSTS SUSTAINABLE DEVELOPMENT TOTAL COSTS UTILITY FUNCTION UTILITY FUNCTIONS ZERO EMISSIONS
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110103092025 http://hdl.handle.net/10986/3289

id	okr-10986-3289
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spelling	okr-10986-32892021-04-23T14:02:08Z Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations Strand, Jon Miller, Sebastian Siddiqui, Sauleh ABATEMENT POLICIES APPROACH ATMOSPHERE AVAILABILITY BALANCE CAPITAL COST CARBON CAPTURE CARBON DIOXIDE CARBON DIOXIDE EMISSIONS CARBON EMISSIONS CARBON TAXES CLIMATE CLIMATE CHANGE CLIMATE POLICY CO2 CONSUMPTION OF FOSSIL COST OF CARBON COST-BENEFIT DEMAND ELASTICITY DEMAND FOR ENERGY DEVELOPMENT ECONOMICS DEW DISCOUNT RATE DISCOUNT RATES DISTRIBUTION OF ENERGY ECONOMIC ANALYSIS ELASTICITY OF DEMAND EMISSION EMISSION ABATEMENT EMISSIONS CONTROL EMISSIONS INTENSITY EMISSIONS PRICES ENERGY CONSUMPTION ENERGY COST SAVINGS ENERGY COSTS ENERGY DEMAND ENERGY ECONOMICS ENERGY EFFICIENCY ENERGY EXPENDITURES ENERGY INTENSIVE ENERGY POLICIES ENERGY POLICY ENERGY PRICE ENERGY PRICES ENERGY REQUIREMENT ENERGY SOURCES ENERGY SUPPLY ENERGY TAXES ENERGY TECHNOLOGIES ENERGY TECHNOLOGY ENERGY USE ENVIRONMENTAL COSTS ENVIRONMENTAL ECONOMICS FINANCIAL SUPPORT FOSSIL FOSSIL ENERGY FOSSIL ENERGY USE FOSSIL FUEL FOSSIL FUELS FUEL FUEL CONSUMPTION FUEL COSTS FUTURE PRICES GHG GHGS GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS MITIGATION GREENHOUSE GASES HIGH ENERGY INTENSITY HIGHER ENERGY CONSUMPTION INCOME INFRASTRUCTURE INVESTMENT LOW-CARBON LOWER COSTS LOWER PRICE MARGINAL COST MARGINAL UTILITY MARKET FAILURE POLICY MAKERS PP PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASE REDUCTION IN ENERGY CONSUMPTION RENEWABLE ENERGY RESOURCE ECONOMICS RETROFIT OPTION RETROFITTING RISK AVERSION SCENARIOS STOCHASTIC PROCESS SUBSTITUTION SUPPLY COSTS SUSTAINABLE DEVELOPMENT TOTAL COSTS UTILITY FUNCTION UTILITY FUNCTIONS ZERO EMISSIONS Investments in large, long-lived, energy-intensive infrastructure investments using fossil fuels increase longer-term energy use and greenhouse gas emissions, unless the plant is shut down early or undergoes costly retrofit later. These investments will depend on expectations of retrofit costs and future energy costs, including energy cost increases from tighter controls on carbon emissions. Simulation analysis shows that the retrofit option can significantly reduce anticipated future energy consumption as of the time of initial investment, and total future energy plus retrofit costs. The more uncertain are the costs, the greater the value of this option. However, the future retrofit option also induces more energy-intensive infrastructure choices, partly offsetting the direct effect of having the option on anticipated energy use. Efficient, forward-looking infrastructure investments have high potential for reducing long-term energy consumption. Particularly if energy prices are expected to rise, however, the potential for reduced energy consumption will be eroded if expectations of energy prices do not include environmental costs or future retrofit possibilities and technologies are not adequately developed. 2012-03-19T17:59:32Z 2012-03-19T17:59:32Z 2011-01-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110103092025 http://hdl.handle.net/10986/3289 English Policy Research working paper ; no. WPS 5516 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ABATEMENT POLICIES APPROACH ATMOSPHERE AVAILABILITY BALANCE CAPITAL COST CARBON CAPTURE CARBON DIOXIDE CARBON DIOXIDE EMISSIONS CARBON EMISSIONS CARBON TAXES CLIMATE CLIMATE CHANGE CLIMATE POLICY CO2 CONSUMPTION OF FOSSIL COST OF CARBON COST-BENEFIT DEMAND ELASTICITY DEMAND FOR ENERGY DEVELOPMENT ECONOMICS DEW DISCOUNT RATE DISCOUNT RATES DISTRIBUTION OF ENERGY ECONOMIC ANALYSIS ELASTICITY OF DEMAND EMISSION EMISSION ABATEMENT EMISSIONS CONTROL EMISSIONS INTENSITY EMISSIONS PRICES ENERGY CONSUMPTION ENERGY COST SAVINGS ENERGY COSTS ENERGY DEMAND ENERGY ECONOMICS ENERGY EFFICIENCY ENERGY EXPENDITURES ENERGY INTENSIVE ENERGY POLICIES ENERGY POLICY ENERGY PRICE ENERGY PRICES ENERGY REQUIREMENT ENERGY SOURCES ENERGY SUPPLY ENERGY TAXES ENERGY TECHNOLOGIES ENERGY TECHNOLOGY ENERGY USE ENVIRONMENTAL COSTS ENVIRONMENTAL ECONOMICS FINANCIAL SUPPORT FOSSIL FOSSIL ENERGY FOSSIL ENERGY USE FOSSIL FUEL FOSSIL FUELS FUEL FUEL CONSUMPTION FUEL COSTS FUTURE PRICES GHG GHGS GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS MITIGATION GREENHOUSE GASES HIGH ENERGY INTENSITY HIGHER ENERGY CONSUMPTION INCOME INFRASTRUCTURE INVESTMENT LOW-CARBON LOWER COSTS LOWER PRICE MARGINAL COST MARGINAL UTILITY MARKET FAILURE POLICY MAKERS PP PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASE REDUCTION IN ENERGY CONSUMPTION RENEWABLE ENERGY RESOURCE ECONOMICS RETROFIT OPTION RETROFITTING RISK AVERSION SCENARIOS STOCHASTIC PROCESS SUBSTITUTION SUPPLY COSTS SUSTAINABLE DEVELOPMENT TOTAL COSTS UTILITY FUNCTION UTILITY FUNCTIONS ZERO EMISSIONS
spellingShingle	ABATEMENT POLICIES APPROACH ATMOSPHERE AVAILABILITY BALANCE CAPITAL COST CARBON CAPTURE CARBON DIOXIDE CARBON DIOXIDE EMISSIONS CARBON EMISSIONS CARBON TAXES CLIMATE CLIMATE CHANGE CLIMATE POLICY CO2 CONSUMPTION OF FOSSIL COST OF CARBON COST-BENEFIT DEMAND ELASTICITY DEMAND FOR ENERGY DEVELOPMENT ECONOMICS DEW DISCOUNT RATE DISCOUNT RATES DISTRIBUTION OF ENERGY ECONOMIC ANALYSIS ELASTICITY OF DEMAND EMISSION EMISSION ABATEMENT EMISSIONS CONTROL EMISSIONS INTENSITY EMISSIONS PRICES ENERGY CONSUMPTION ENERGY COST SAVINGS ENERGY COSTS ENERGY DEMAND ENERGY ECONOMICS ENERGY EFFICIENCY ENERGY EXPENDITURES ENERGY INTENSIVE ENERGY POLICIES ENERGY POLICY ENERGY PRICE ENERGY PRICES ENERGY REQUIREMENT ENERGY SOURCES ENERGY SUPPLY ENERGY TAXES ENERGY TECHNOLOGIES ENERGY TECHNOLOGY ENERGY USE ENVIRONMENTAL COSTS ENVIRONMENTAL ECONOMICS FINANCIAL SUPPORT FOSSIL FOSSIL ENERGY FOSSIL ENERGY USE FOSSIL FUEL FOSSIL FUELS FUEL FUEL CONSUMPTION FUEL COSTS FUTURE PRICES GHG GHGS GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS MITIGATION GREENHOUSE GASES HIGH ENERGY INTENSITY HIGHER ENERGY CONSUMPTION INCOME INFRASTRUCTURE INVESTMENT LOW-CARBON LOWER COSTS LOWER PRICE MARGINAL COST MARGINAL UTILITY MARKET FAILURE POLICY MAKERS PP PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASE REDUCTION IN ENERGY CONSUMPTION RENEWABLE ENERGY RESOURCE ECONOMICS RETROFIT OPTION RETROFITTING RISK AVERSION SCENARIOS STOCHASTIC PROCESS SUBSTITUTION SUPPLY COSTS SUSTAINABLE DEVELOPMENT TOTAL COSTS UTILITY FUNCTION UTILITY FUNCTIONS ZERO EMISSIONS Strand, Jon Miller, Sebastian Siddiqui, Sauleh Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations
geographic_facet	The World Region The World Region
relation	Policy Research working paper ; no. WPS 5516
description	Investments in large, long-lived, energy-intensive infrastructure investments using fossil fuels increase longer-term energy use and greenhouse gas emissions, unless the plant is shut down early or undergoes costly retrofit later. These investments will depend on expectations of retrofit costs and future energy costs, including energy cost increases from tighter controls on carbon emissions. Simulation analysis shows that the retrofit option can significantly reduce anticipated future energy consumption as of the time of initial investment, and total future energy plus retrofit costs. The more uncertain are the costs, the greater the value of this option. However, the future retrofit option also induces more energy-intensive infrastructure choices, partly offsetting the direct effect of having the option on anticipated energy use. Efficient, forward-looking infrastructure investments have high potential for reducing long-term energy consumption. Particularly if energy prices are expected to rise, however, the potential for reduced energy consumption will be eroded if expectations of energy prices do not include environmental costs or future retrofit possibilities and technologies are not adequately developed.
format	Publications & Research :: Policy Research Working Paper
author	Strand, Jon Miller, Sebastian Siddiqui, Sauleh
author_facet	Strand, Jon Miller, Sebastian Siddiqui, Sauleh
author_sort	Strand, Jon
title	Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations
title_short	Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations
title_full	Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations
title_fullStr	Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations
title_full_unstemmed	Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations
title_sort	infrastructure investments under uncertainty with the possibility of retrofit : theory and simulations
publishDate	2012
url	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110103092025 http://hdl.handle.net/10986/3289
_version_	1764386739594461184

Infrastructure Investments under Uncertainty with the Possibility of Retrofit : Theory and Simulations

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