The impact of carbon trading prices on firms'investment decisions to reduce emissions-under two fluctuations of geometric brownian motion and mean regression
The uncertainty caused by the fluctuation of carbon trading price has a significant impact on the investment decision of carbon-intensive enterprises that are included in the carbon trading system.There are a lot of studies that use the Real-Option method to analyze the investment threshold and parameter sensitivity of enterprises to invest in emission reduction projects under the fluctuation of carbon trading price,but most of these studies use the real option model based on Geometric Brownian Motion.This paper holds that Mean Reversion is better than Geometric Brownian Motion to describe the fluctuation of carbon trading price.The results show that the Geometric Brownian Motion model may underestimate the value of carbon reduction projects and the carbon threshold of emission-reduction project investment under the same parameters.