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This textbook provides an introduction to environmental finance and investment. The authors analyse emissions markets in a real options setting and illustrate emitting companies' decision-making processes in the context of the European Union Emission Trading Scheme (ETS). In the light of the current economic and environmental situation, it aims to answer the following fundamental questions: Under what conditions could a market-based approach contribute to a decrease in emissions? How are abatement and investment strategies generated or promoted under permit regimes like the EU ETS? In the context of the EU ETS, what is the trade-off between production, technological changes and pollution?§§This book is intended to provide students and practitioners with the knowledge and theoretical tools they need in order to answer these and other more general questions in the context of so-called environmental finance theory, a new field of research that investigates the economic, financial and managerial impacts of market-based environmental policies.§
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