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Market Power in Interactive Environmental and Energy Markets: The Case of Green Certificates

Author

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  • Eirik S. Amundsen
  • Gjermund Nese

Abstract

A market for tradable green certificates (TGCs) is strongly interwoven in the electricity market in that the producers of green electricity are also the suppliers of TGCs. Therefore, strategic interaction may result. We formulate an analytic equilibrium model for simultaneously functioning electricity and TGC markets, and focus on the role of market power (i.e., Stackelberg leadership). One result is that a certificate system faced with market power may collapse into a system of per-unit subsidies. Also, the model shows that TGCs may be an imprecise instrument for regulating the generation of green electricity.

Suggested Citation

  • Eirik S. Amundsen & Gjermund Nese, 2017. "Market Power in Interactive Environmental and Energy Markets: The Case of Green Certificates," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 173(2), pages 301-321, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201706)173:2_301:mpiiea_2.0.tx_2-3
    DOI: 10.1628/093245616X14690820714372
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    Cited by:

    1. Heimvik, Arild & Amundsen, Eirik S., 2021. "Prices vs. percentages: Use of tradable green certificates as an instrument of greenhouse gas mitigation," Energy Economics, Elsevier, vol. 99(C).

    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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