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Price Volatility and Banking in Green Certificate Markets

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Author Info
Eirik Amundsen ()
Fridrik Baldursson
Jørgen Mortensen

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Abstract

There is concern that prices in a market for Green Certificates (GCs) primarily based on volatile wind power will fluctuate excessively, leading to corresponding volatility of electricity prices. Applying a rational expectations simulation model of competitive storage and speculation of GCs the paper shows that the introduction of banking of GCs may reduce price volatility considerably and lead to increased social surplus. Banking lowers average prices and is therefore not necessarily to the benefit of “green producersâ€. Proposed price bounds on GC-prices will reduce the importance of banking and even of the GC system itself. Copyright Springer Science+Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s10640-006-9015-1
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Publisher Info
Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 35 (2006)
Issue (Month): 4 (December)
Pages: 259-287
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Handle: RePEc:kap:enreec:v:35:y:2006:i:4:p:259-287

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Web page: http://www.springerlink.com/link.asp?id=100263

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Related research
Keywords: commodity speculation electricity environment green certificates marketable permits uncertainty Q28 Q42 Q48

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 8909, Institut National de la Statistique et des Etudes Economiques-.
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  2. Amundsen, Eirik S. & Mortensen, Jorgen Birk, 2001. "The Danish Green Certificate System: some simple analytical results," Energy Economics, Elsevier, vol. 23(5), pages 489-509, September. [Downloadable!] (restricted)
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  3. Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October. [Downloadable!] (restricted)
    Other versions:
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