3067. The Role of Regulation in Accelerating the Full Transition from Fossil Fuels
Invited abstract in session WA-7: Understanding and Measuring Risk: Macroeconomic and Financial Perspectives, stream Risk Management in Commodities and Financial Markets .
Wednesday, 8:30-10:00Room: Clarendon GR.01
Authors (first author is the speaker)
| 1. | ioannis paraskevopoulos
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Abstract
This paper integrates theoretical modeling with longitudinal empirical analysis to examine how carbon pricing affects energy transition dynamics. We develop a stochastic model that distinguishes between economic stranding points (when fossil assets become unviable) and full transition periods (time to complete infrastructure transformation), deriving closed-form solutions that link these metrics to company characteristics and regulatory parameters. Testing our model's predictions with panel data from nine energy companies observed monthly from 2015-2025 (1,107 observations), we find that a 1 percentage point increase in fossil exposure decreases economic stranding points by 0.186 years (elasticity: -0.84) while widening implementation gaps (elasticity: 1.41). A €10 increase in carbon prices accelerates economic stranding by 0.76 years. Our analysis reveals a policy paradox: stronger carbon pricing effectively signals the need for transition, particularly for carbon-intensive companies, yet implementation gaps have widened rather than narrowed over the decade. This suggests that while carbon pricing creates appropriate economic signals, complementary policies are needed to address the growing implementation challenges faced by companies with high fossil exposure. These findings inform regulatory design by quantifying how different policy levers affect both the economic incentives and practical barriers to energy transition.
Keywords
- Energy Policy and Planning
- Environmental Management
- Financial Modelling
Status: accepted
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