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

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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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Bibliographic Info

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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References

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  1. 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.
  2. 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.
  3. Christoph Bohringer, 2002. "Climate Politics from Kyoto to Bonn: From Little to Nothing?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 51-71.
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Cited by:
  1. Paul Koutstaal & Michiel Bijlsma & Gijsbert Zwart & X. van Tilburg, 2009. "Market performance and distributional effects on renewable energy markets," CPB Document 190, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Hagen, Kåre P. & Hansen, Bjørn & Vagstad, Steinar, 2004. "Synergies and non-discriminatory access pricing," Working Papers in Economics 13/04, University of Bergen, Department of Economics.
  3. Amundsen, Eirik S. & Nese, Gjermund, 2009. "Integration of tradable green certificate markets: What can be expected?," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 903-922, November.
  4. 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.
  5. Amundsen, Eirik S. & Nese, Gjermund, 2006. "Integratation of Tradable Green Certificate Markets: What can be expected?," MPRA Paper 10628, University Library of Munich, Germany.
  6. Torstein Bye & Annegrete Bruvoll, 2008. "Multiple instruments to change energy behaviour: The emperor’s new clothes?," Discussion Papers 549, Research Department of Statistics Norway.

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