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The economic impact of the Green Certificate market through the Macro Multiplier approach

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  • Maurizio Ciaschini, Rosita Pretaroli, Francesca Severini, Claudio Socci

    (University of Macerata, Politechnical University of Marche)

Abstract

In the last decade, as many other European countries, the Italian Government adopted several reforms in order to increase the use of Renewable Energy Sources (RES). The liberalization of the electricity market that represent one of these reforms aims to reach environmental benefits from the substitution of fossil fuel with renewable sources.The Italian Green Certificate market was introduced in 2002 in order to accomplish this objective and represents a mechanism where a quota of renewable electricity is imposed to suppliers in proportion to their sales. The electricity industries are obliged to meet this condition by producing the quantity of renewable electricity by means of a change in their production process, otherwise they must buy a number of certificates corresponding to the quota. This mechanism changes the importance of the electricity industry first in promoting climate protection, than in terms of the impact in the economy as a whole. A policy aimed to develop the market of green certificates may lead to environmental improvement by switching the energy production process to renewable resources. But above all an increase in demand for green certificates, resultant from a reform on the quota of renewable electricity, can generate positive change in all components of the industrial production. For this purpose, the paper aims to quantify the economic impact of a reform on Green Certificate market for the Italian system by means of the Macro Multiplier (MM) approach. The analysis is performed through the Hybrid Input-Output (I-O) model that allows expressing the energy flows in physical terms (GWh) while all other flows are expressed in monetary terms (e). Moreover, through the singular value decomposition of the inverse matrix of the model, which reveals� he set of key structures of the exogenous change of final demand, we identify the appropriate key structure� ble to obtain both the expected positive total output change and the increase of electricity� roduction from RES.

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Bibliographic Info

Paper provided by Macerata University, Department of Studies on Economic Development (DiSSE) in its series Working Papers with number 26-2010.

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Date of creation: May 2010
Date of revision: May 2010
Handle: RePEc:mcr:wpaper:wpaper00026

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Keywords: Hybrid I-O model; Macro Multiplier; Environmental Policy;

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  1. Ciaschini, Maurizio & Socci, Claudio, 2007. "Final demand impact on output: A macro multiplier approach," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 115-132.
  2. Maurizio Ciaschini & Rosita Pretaroli & Claudio Socci, 2009. "A Convenient Multisectoral Policy Control For Ict In The Us Economy," Metroeconomica, Wiley Blackwell, vol. 60(4), pages 660-685, November.
  3. Burtraw, Dallas & Parry, Ian & Goulder, Lawrence & Williams III, Roberton, 1998. "The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting," Discussion Papers dp-98-22, Resources For the Future.
  4. Ciaschini, Maurizio, 1989. "Scale and structure in economic modelling," Economic Modelling, Elsevier, vol. 6(4), pages 355-373, October.
  5. Erik Dietzenbacher & Jesper Stage, 2006. "Mixing oil and water? Using hybrid input-output tables in a Structural decomposition analysis," Economic Systems Research, Taylor & Francis Journals, vol. 18(1), pages 85-95.
  6. Jensen, S. G. & Skytte, K., 2002. "Interactions between the power and green certificate markets," Energy Policy, Elsevier, vol. 30(5), pages 425-435, April.
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