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On the Price and Volume Effects from Green Certificates in the Energy Market

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Author Info
Torstein Bye () (Statistics Norway)

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Abstract

We present a model for an energy market that includes a green certificate for suppliers of energy from renewables and a purchaser commitment to buy these certificates. We show that price and volume effects in the energy market are ambigous under a wide range of alternative levels of the purchaser commitment. We calibrate our model to data for the Norwegian economy. Simulations shows a downward movement in energy prices as the government starts increasing the level of the purchaser commitment. This implies that the producer of ordinary energy pays for the restriction in the market while energy consumption and consumer surplus increases. When the purchaser commitment increases above a certain level, the purchaser price increases and the volume effect is negative. Although the effects are sensitive to elasticities of demand and supply of both technologies, the main results are robust against a variety of combinations of elasticities. The article discusses effects both under autarky and free trade of both energy and green certificates. The results vary denpendent upon whether only one or a majority of actual countires introduces a domestic market or allows for international trade both in energy and the green certificate instrument.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 351.

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Date of creation: Jun 2003
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Handle: RePEc:ssb:dispap:351

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Related research
Keywords: Green certificates; energy market model; new instruments;

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Find related papers by JEL classification:
Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
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
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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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. Christoph Bohringer, 2002. "Climate Politics from Kyoto to Bonn: From Little to Nothing?," The Energy Journal, International Association for Energy Economics, vol. 23(2), pages 51-72.
  2. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June. [Downloadable!] (restricted)
  3. 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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Cited by:
(explanations, 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. Amundsen, Eirik S. & Nese, Gjermund, 2006. "Integratation of Tradable Green Certificate Markets: What can be expected?," MPRA Paper 10628, University Library of Munich, Germany. [Downloadable!]
  2. Torstein Bye and Annegrete Bruvoll, 2008. "Multiple instruments to change energy behaviour: The emperor’s new clothes?," Discussion Papers 549, Research Department of Statistics Norway. [Downloadable!]
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