Options pricing shows next few years crucial for US coal

Carbon trading outweighed by building and fuel cost, research finds


Using options-pricing techniques to value coal-fired power stations shows that, for many, their future will be decided not by changes in government policy, but by their age. A paper due to be published later this year in the Journal of Energy Markets argues that the youngest and oldest coal power stations will be unaffected by any change in emissions pricing. The costs of building new plants, and the price difference between coal and natural gas, will be the most important metrics.


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