Climate Cost Uncertainty, Retrofit Cost Uncertainty, and Infrastructure Closedown : A Framework for Analysis
Large and energy-intensive infrastructure investments with long life times have substantial implications for climate policy. This study focuses on options to scale down energy consumption and carbon emissions now and in the future, and on the costs...
Main Authors: | , |
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Format: | Policy Research Working Paper |
Language: | English en_US |
Published: |
World Bank, Washington, DC
2014
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Subjects: | |
Online Access: | http://documents.worldbank.org/curated/en/2010/02/11795686/climate-cost-uncertainty-retrofit-cost-uncertainty-infrastructure-closedown-framework-analysis http://hdl.handle.net/10986/19921 |
Summary: | Large and energy-intensive
infrastructure investments with long life times have
substantial implications for climate policy. This study
focuses on options to scale down energy consumption and
carbon emissions now and in the future, and on the costs of
doing so. Two ways carbon emissions can be reduced
post-investment include retrofitting the infrastructure, or
closing it down. Generally, the presence of bulky
infrastructure investments makes it more costly to reduce
emissions later. Moreover, when expected energy and
environmental costs are continually rising, inherent biases
in the selection processes for infrastructure investments
lead to excessive energy intensity in such investments. Thus
great care must be taken when choosing the energy intensity
of the infrastructure at the time of investment. Simulations
indicate that optimally exercising the retrofit option, when
it is available, reduces ex ante expected energy consumption
relative to the no-option case. Total energy plus retrofit
costs can also be substantially reduced, the more so the
larger is ex ante cost uncertainty. However, the
availability of the retrofit option also leads to a more
energy intensive initial infrastructure choice; this offsets
some, but usually not all, of the gains from options for
subsequent retrofitting. |
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