A study on competitiveness of IGCC technology using Real Option approach according to uncertainty of carbon dioxide emission price

The developed countries which are involved in Annex-1 of Kyoto protocol have tried to mitigate GHG to the reduction objective. There are many ways to accomplish this objective such as fuel switching from more GHG emissive to less, adopt more efficient technologies and so on. In the case of power plant, combined cycle using natural gas is less emissive than coal fired power plant. More efficient power plant is less emissive with respect to generated electricity. But, there is difficult obstacle to reduce GHG to reduction objective because to adopt these eco-friendly fuels and more efficient plant need more cost. To find cost effective way of GHG reduction, EU developed Emission trade system such as EU-ETS and National Allocation Plan. In this scheme, the amount of CO2 reduction can be traded like commodities. Korea was excluded in the first session of the Kyoto Protocol, so there is no emission trade system such as EU-ETS. But it is expected that the industrialized countries would pressure Korea into commitment. In this study, economic comparison is analyzed between IGCC technology and conventional technology under assumption of existence of emission trading system. Emission price in this trading system is not deterministic. The economic competitiveness under emission price uncertainty is analyzed in this study.