Research & development towards green technologies under technical and policy uncertainty : a real options approach to investments

Green technological progress bears a strong potential to alleviate climate change, but its utilization is contingent on factors which are by nature impossible to anticipate or predict. Developing stochastic optimisation models, we explore how the decision to invest in research and development towards greener technologies is influenced by environmental policies in a world of technical and policy uncertainty. The models are applied to offshore wind park investments and investments into energy-saving technologies. Policies studied are e.g. energy taxes and quotas as well as research subsidies.