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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.

Suggested Citation

  • Ole Langniss & Barbara Praetorius, 2004. "How Much Market Do Market-Based Instruments Create?: An Analysis for the Case of "White" Certificates," Discussion Papers of DIW Berlin 425, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp425
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    Cited by:

    1. Passey, Robert & MacGill, Iain, 2009. "Energy sales targets: An alternative to White Certificate schemes," Energy Policy, Elsevier, vol. 37(6), pages 2310-2317, June.
    2. Pedro Linares & Xavier Labandeira, 2010. "Energy Efficiency: Economics And Policy," Journal of Economic Surveys, Wiley Blackwell, vol. 24(3), pages 573-592, July.
    3. Gillenwater, Michael, 2008. "Redefining RECs--Part 2: Untangling certificates and emission markets," Energy Policy, Elsevier, vol. 36(6), pages 2120-2129, June.
    4. Dicorato, M. & Forte, G. & Trovato, M., 2008. "Environmental-constrained energy planning using energy-efficiency and distributed-generation facilities," Renewable Energy, Elsevier, vol. 33(6), pages 1297-1313.
    5. Georg Meran & Nadine Wittmann, 2012. "Green, Brown, and Now White Certificates: Are Three One Too Many? A Micro-Model of Market Interaction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(4), pages 507-532, December.
    6. repec:eee:enepol:v:107:y:2017:i:c:p:53-62 is not listed on IDEAS
    7. Afshari, Afshin & Friedrich, Luiz, 2016. "A proposal to introduce tradable energy savings certificates in the emirate of Abu Dhabi," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1342-1351.
    8. Louis-Gaetan Giraudet and Dominique Finon, 2015. "European experiences with white certifirecate obligations: A critical review of existing evaluations," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    9. 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.
    10. Gianpaolo Iazzolino & Rossella Gabriele, 2016. "Energy Efficiency and Sustainable Development: An Analysis of Financial Reliability in Energy Service Companies Industry," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 222-233.
    11. 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.
    12. Stede, Jan, 2017. "Bridging the industrial energy efficiency gap – Assessing the evidence from the Italian white certificate scheme," Energy Policy, Elsevier, vol. 104(C), pages 112-123.
    13. Jan Stede, 2016. "Bridging the Industrial Energy Efficiency Gap: Assessing the Evidence from the Italian White Certificate Scheme," Discussion Papers of DIW Berlin 1565, DIW Berlin, German Institute for Economic Research.
    14. 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.
    15. 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.
    16. 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.
    17. Antonio Angelo Romano & Giuseppe Scandurra & Alfonso Carfora, 2016. "Estimating the Impact of Feed-in Tariff Adoption: Similarities and Divergences among Countries through a Propensity-score Matching Method," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 144-151.
    18. 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.
    19. repec:eee:eneeco:v:66:y:2017:i:c:p:279-289 is not listed on IDEAS
    20. 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.
    21. 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.
    22. Jaehn, Florian & Letmathe, Peter, 2010. "The emissions trading paradox," European Journal of Operational Research, Elsevier, vol. 202(1), pages 248-254, April.

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    Keywords

    Tradable certificates; Energy efficiency; Transaction cost;

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