IAM_COMPACT_Study_6_Interest_rates

This dataset contains the underling raw data of IAM COMPACT "Study 6 - Interest rates".

Models used to assess decarbonisation pathways typically assume a uniform cost of capital; such assumption, however, does not do justice to real-world conditions and may therefore lead to inaccurate policy recommendations. The study aims to explore how non-uniform weighted average cost of capital (WACC), i.e., the discount rate a company uses to estimate its net present value, could influence global decarbonisation pathways. 

The study builds on empirically calibrated WACC values by region and technology in global IAMs and expands the modelling analysis by exploring stakeholder-driven pathways of de-risking clean energy technologies and risking fossil fuels. As one of the largest uncertainties lies in the way WACC values are expected to evolve over time, the empirical estimates of baseline WACC values are combined with an expert-based approach to produce forward-looking scenarios of evolving WACCs over time. The study also attempts to incorporate a corrective justice dimension in its narratives, by assessing the impacts of risk underwriting for low-carbon investments through taxing corporate windfall profits for 2022 and distributing the revenue as subsidies towards high-risk regions.

Results of the study have been documented in D5.6 - Behaviour, social and disruptive innovation (DOI 10.5281/zenodo.12751959)