The power sector carries a considerably great burden of the CO₂ emission reductions required to address climate change, a feature common to many scenarios of emissions abatement. These reductions will only be possible if existing plants are replaced with more efficient, and less-emitting types of plants over the coming decades. This report considers: the risk factors that this transition requires from a micro-economic perspective; the role of plant refurbishment; and the value of waiting for investors in electricity generation, when exposed to a range of uncertainties. These factors have important bearings on future policy design as governments consider how to best manage the energy sector transition needed to meet climate change objectives.

The document (including graphs and tables) can be downloaded at:

http://www.iea.org/papers/2010/economics_of_transition.pdf

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