Developing Customized GHG Price Curves

For companies assessing the implications of a CO₂-constrained world, understanding the future cost of emissions (or the value of reductions) is the billion-dollar question. Finding the right answer to this question will be critical to balancing increasingly clear policy trends toward emissions mandates on the one hand, and continued market uncertainty on the other.

Many firms view climate change emissions reduction mandates as a pivotal issue for their competitiveness, if not the most significant financial risk they face. Yet most companies do not explicitly value future CO₂ emissions and reductions in their strategic or investment planning. As a result, they effectively value the future price of CO₂ at $0, notwithstanding the availability of a large literature on the potential future directions of GHG policy and markets and a range of price curve forecasts.

Importance of a Customized Approach

TC+ES realized that it is not the lack of price curve forecasts that impedes many companies' progress, but the lack of a price curve they are comfortable using for business decisionmaking purposes. This kind of curve relies on a process by which corporate buy-in to key policy and market scenarios is achieved and then translated into a price curve appropriate to the company's specific situation. Accomplishing this goal requires a transparent and interactive approach to the price curve modeling process in which the client's policy and market expectations are identified and incorporated. This is the strength of TC+ES's customized forward price curve modeling, and this is why major utilities in North America and Japan have used the model to make capital investment decisions, develop mitigation strategies, and advance corporate planning in this area.

TC+ES's Customized Forward Price Curve Modeling makes use of several TC+ES's tools and Models, including the Demand and Supply Tools and the Cli-Mit Near-Term Forward Price Curve Model.