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Feed-in tariff and tradable green certificate in oligopoly

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  • Tamás, Mészáros Mátyás
  • Bade Shrestha, S.O.
  • Zhou, Huizhong
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    Abstract

    Feed-in tariff (FIT) and tradable green certificate (TGC) schemes are studied in a formal model and numerical example using the UK data. We find that if the markets were perfectly competitive, then feed-in tariff and the certificate price would be the same. However, when the markets are imperfect, they are generally different. While both the tariff and certificate price fluctuate around the difference between the costs of green and black energy, the tariff deviates more from the cost difference than the certificate price. The supplies of both black and green energy under FIT are higher than TGC, obviously as a result of subsidies. A troubling outcome is that the total energy supply increases under FIT as the renewables quota increases, which can negate other measures to mitigate climate changes such as demand management. Finally, using the data from the UK market, we find that social welfare under TGC is consistently higher than FIT for a wide range of values of the parameters.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 38 (2010)
    Issue (Month): 8 (August)
    Pages: 4040-4047

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    Handle: RePEc:eee:enepol:v:38:y:2010:i:8:p:4040-4047

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    Web page: http://www.elsevier.com/locate/enpol

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    Keywords: Tradable green certificate Feed-in tariff UK electricity market;

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    Cited by:
    1. Xin-gang, Zhao & Tian-tian, Feng & Lu, Cui & Xia, Feng, 2014. "The barriers and institutional arrangements of the implementation of renewable portfolio standard: A perspective of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 30(C), pages 371-380.
    2. Georg von Wangenheim & Tom Müller, 2011. "Feed-in-Tariffs Financed by Energy Taxes: When do They Lower Consumer Prices?," MAGKS Papers on Economics 201113, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Kurakawa, Yukihide, 2013. "The optimal vertical structure in the electricity industry when the incumbent has a cost advantage," Energy Policy, Elsevier, vol. 63(C), pages 622-627.
    4. Kevin Currier & Yanming Sun, 2014. "Market Power and Welfare in Electricity Markets Employing Tradable Green Certificate Systems," International Advances in Economic Research, Springer, vol. 20(2), pages 129-138, May.
    5. Currier, Kevin M., 2013. "A regulatory adjustment process for the determination of the optimal percentage requirement in an electricity market with Tradable Green Certificates," Energy Policy, Elsevier, vol. 62(C), pages 1053-1057.
    6. Martin, Nigel & Rice, John, 2013. "The solar photovoltaic feed-in tariff scheme in New South Wales, Australia," Energy Policy, Elsevier, vol. 61(C), pages 697-706.

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