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How Much Market Do Market-Based Instruments Create?: An Analysis for the Case of "White" Certificates

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  • Ole Langniss
  • Barbara Praetorius

Abstract

In the context of economic instruments for more energy efficiency and climate protection, tradable certificates have been investigated for renewable energy and for a number of emissions. In contrast, tradable energy efficiency - or "white" - certificates have only lately been considered as a market-based tool to foster energy efficiency as compared to standards and labelling, for example. Theoretically, there is little doubt about the advantages. In practice, however, somefundamental problems arise. Critical issues are the design of an efficient artificial market for "white" certificates, its compatibility with the European emissions trading system, the identification of a suitable target group for an energy efficiency obligation and the measurement of energy savings as compared to a reference use of energy. We use the theoretical framework of Transaction Cost Economics to elaborate these issues. We conclude that transaction costs and investment specificity will restrict markets for "white" certificates in practise. Long-term contracts rather than spot trade will be the prevailing form of governance for energy efficiency investments.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.41821.de/dp425.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 425.

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Length: 25 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp425

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Keywords: Tradable certificates; Energy efficiency; Transaction cost;

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  1. Axel Michaelowa & Emmanuel Fages, 1999. "Options for baselines of the clean development mechanism," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 4(2), pages 167-185, June.
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  7. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
  8. Vine, Edward & Hamrin, Jan & Eyre, Nick & Crossley, David & Maloney, Michelle & Watt, Greg, 2003. "Public policy analysis of energy efficiency and load management in changing electricity businesses," Energy Policy, Elsevier, vol. 31(5), pages 405-430, April.
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Cited by:
  1. Xavier Labandeira Villot & Pedro Linares, 2009. "Energy Efficiency: Economics and Policy," Economic Reports 06-09, FEDEA.
  2. Mundaca, Luis & Neij, Lena, 2009. "A multi-criteria evaluation framework for tradable white certificate schemes," Energy Policy, Elsevier, vol. 37(11), pages 4557-4573, November.
  3. Calili, Rodrigo F. & Souza, Reinaldo C. & Galli, Alain & Armstrong, Margaret & Marcato, André Luis M., 2014. "Estimating the cost savings and avoided CO2 emissions in Brazil by implementing energy efficient policies," Energy Policy, Elsevier, vol. 67(C), pages 4-15.
  4. Passey, Robert & MacGill, Iain & Outhred, Hugh, 2008. "The governance challenge for implementing effective market-based climate policies: A case study of The New South Wales Greenhouse Gas Reduction Scheme," Energy Policy, Elsevier, vol. 36(8), pages 2999-3008, August.
  5. Passey, Robert & MacGill, Iain, 2009. "Energy sales targets: An alternative to White Certificate schemes," Energy Policy, Elsevier, vol. 37(6), pages 2310-2317, June.
  6. Georg Meran & Nadine Wittmann, 2008. "Green, Brown, and Now White Certificates: Are Three One Too Many? A Micromodel of Market Interaction," Discussion Papers of DIW Berlin 809, DIW Berlin, German Institute for Economic Research.
  7. Mundaca, Luis, 2008. "Markets for energy efficiency: Exploring the implications of an EU-wide 'Tradable White Certificate' scheme," Energy Economics, Elsevier, vol. 30(6), pages 3016-3043, November.
  8. Rutherford, J.P. & Scharpf, E.W. & Carrington, C.G., 2007. "Linking consumer energy efficiency with security of supply," Energy Policy, Elsevier, vol. 35(5), pages 3025-3035, May.
  9. Jaehn, Florian & Letmathe, Peter, 2010. "The emissions trading paradox," European Journal of Operational Research, Elsevier, vol. 202(1), pages 248-254, April.
  10. Sorrell, Steve & Harrison, David & Radov, Daniel & Klevnas, Per & Foss, Andrew, 2009. "White certificate schemes: Economic analysis and interactions with the EU ETS," Energy Policy, Elsevier, vol. 37(1), pages 29-42, January.
  11. Oikonomou, Vlasis & Jepma, Catrinus & Becchis, Franco & Russolillo, Daniele, 2008. "White Certificates for energy efficiency improvement with energy taxes: A theoretical economic model," Energy Economics, Elsevier, vol. 30(6), pages 3044-3062, November.
  12. Oikonomou, Vlasis & Rietbergen, Martijn & Patel, Martin, 2007. "An ex-ante evaluation of a White Certificates scheme in The Netherlands: A case study for the household sector," Energy Policy, Elsevier, vol. 35(2), pages 1147-1163, February.

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