The great carbon arbitrage, going short (retiring) on coal and going long (investing) on renewables (also known as an “asset for fuel swap”) is positive NPV. The present value of the social benefits of avoided emissions is higher than the sum of the present value of the foregone cash flows of phasing out coal and the PV of the costs of replacing coal by renewable generation.

This case explores the social, political and economic dilemmas faced by Ursula von der Leyen, president of the European Commission and a passionate supporter of measures to limit climate change at a time of great upheaval in global energy markets.