Professor of Decision Sciences, Derek Bunn, has received a significant grant to fund research into the impact of climate change policy uncertainty on energy market behaviour. The grant was awarded by the Economic and Social Research Council (ESRC), with additional support from two UK Government departments - Department for Business, Enterprise & Regulatory Reform and Department for Environment, Food and Rural Affairs.
The research programme is valued at £400,000 over 2 years and will study ‘Modelling the Evolution of Climate Change Policy Uncertainty on Electricity Investment Incentives and Risk”’. This award is the latest in a long-standing research programme on understanding energy market behaviour at London Business School.
Professor Bunn’s research aims to develop a better understanding of the interactions between investment behaviour in the electricity sector and the various policy initiatives associated with mitigating global warming.
The study will focus on the effects of regulatory risk in investment decision-making, how policy-makers learn about uncertain costs and adapt accordingly, and how uncertainty over climate change economics and international policy create risks that have to be allocated between companies and governments.