CCfDs and compare it to other carbon pricing regimes. In our model, a regulator can offer CCfDs to risk-averse firms that … decide upon irreversible investments into an emission-free technology in the presence of risk. Risk can originate from the … instrument as it hedges firms’ risk encouraging investments when the firms’ risk aversion would otherwise inhibit this. In …

price, the equilibrium risk-free rate, and risk premia. Climate disasters, which are more likely to occur sooner as … temperature rises, significantly increase risk premia. …

or 1.5oC. The safe carbon budget is lower if uncertainty about the transient climate response is high and risk tolerance …