WASTED ENERGY: RE-DIRECTING INVESTMENT INTO RENEWABLES THROUGH ENVIRONMENTAL POLICY

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2020-11

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Abstract

The Clean Power Plan (CPP) was the first ever regulation to limit carbon dioxide (CO2) emissions from both new and existing power plants under the Clean Air Act (CAA) and is recognized as one of the most monumental steps towards taking action on climate change and investing in renewable energy. The policy is, however, commonly denounced by some for its detrimental impact to the U.S. coal manufacturing and production sectors and grouped with other policies for waging a ‘War on Coal.’ This paper analyzes whether the CPP was an effective policy at swaying investor mindsets in energy capital markets and decarbonizing investor portfolios. This analysis differs from previous literature through its focus on an event study of specific brown and green energy indices and exchange traded funds (ETFs) at the time of the CPP’s proposal on June 2, 2014 and final announcement on August 3, 2015. The presence or lack of discontinuities in the market in the 100-day trading window surrounding both events serves as a measure for understanding investors’ reactions to the policy and its implications for future profits. This paper also describes the legal and political pushback to the policy as well as instances of disinformation spread by the coal industry to compensate for a bleak cashflow outlook. Discussion on the implications of using policy as a government intervention to create greener and cleaner markets concludes this paper, arguing that environmental policy can serve as an effective tool to decrease investment in carbon-intensive energy sources, as climate change poses an increasing risk to the planet and public health.

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Katz, Sophia (2020). WASTED ENERGY: RE-DIRECTING INVESTMENT INTO RENEWABLES THROUGH ENVIRONMENTAL POLICY. Honors thesis, Duke University. Retrieved from https://hdl.handle.net/10161/22443.


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