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Some Implications of Investment Cost Reduction Policies in Energy Markets Employing Green Certificate Systems

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  • Kevin Currier

Abstract

Around the world, green certificate systems are widely employed as support mechanisms for the promotion of renewable energy production. Due to large initial capital costs for renewable energy projects, investment cost reduction policies are often employed by policy makers as complementary support measures. In this note, we study some implications of the use of investment cost reduction policies in an energy market operated under a green certificate system. We demonstrate that, paradoxically, use of (or intensification of) investment cost reduction policies results in increased emissions from fossil fuel (“black”) producers. Welfare effects depend on the distribution of costs and benefits to the relevant interest groups. However, if the policy objective requires maintaining a constant level of emissions, investment cost mitigation must be accompanied by a simultaneous upward adjustment in the renewables target. Copyright Springer Science+Business Media Dordrecht 2015

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  • Kevin Currier, 2015. "Some Implications of Investment Cost Reduction Policies in Energy Markets Employing Green Certificate Systems," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(2), pages 317-323, February.
    • Handle: RePEc:kap:enreec:v:60:y:2015:i:2:p:317-323
    DOI: 10.1007/s10640-014-9774-z
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    References listed on IDEAS

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    Cited by:

    1. Fabio Antoniou & Roland Strausz, 2017. "Feed-in Subsidies, Taxation, and Inefficient Entry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 925-940, August.
    2. Currier, Kevin M. & Rassouli-Currier, Susanne, 2018. "Producer incentives in electricity markets with green quotas and tradable certificates," Utilities Policy, Elsevier, vol. 55(C), pages 59-68.
    3. Currier, Kevin M., 2016. "Incentives for cost reduction and cost padding in electricity markets with overlapping “green” regulations," Utilities Policy, Elsevier, vol. 38(C), pages 72-75.
    4. Kevin Currier, 2014. "Some implications of design element choice when combining a green quota with a system of feed-in tariffs," Economics Bulletin, AccessEcon, vol. 34(3), pages 1723-1732.
    5. O'Shaughnessy, Eric, 2022. "How policy has shaped the emerging solar photovoltaic installation industry," Energy Policy, Elsevier, vol. 163(C).

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