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Green, Brown, and Now White Certificates: Are Three One Too Many? A Micromodel of Market Interaction

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  • Georg Meran
  • Nadine Wittmann

Abstract

Our paper deals with modeling the effects of introducing a market-based tool for improving end-users' efficiency in an energy market which is already regulated through a cap-and-trade system for green house gas emissions and a quota system meant to improve competitiveness of energy produced using renewable resources. Our results show that the regulation of energy demand achieves its underlying objects of energy savings and energy efficiency solely at the expense of other goals such as the environmental efficiency of energy production. In our model, the implementation of a market for White Certificates (WCTS) causes energy producers' investment in abatement to decrease along with the price for Brown Certificates and the amount of renewable energy demanded. Once we turn to the currently more empirically relevant case of integrating end-users only partially into WCTS, the unregulated group compensates in parts for the decrease in demand of the regulated group, due to an indirect price effect. As both supply and demand side of the market are regulated, this special set of regulations applied can, therefore, be compared to the grip of pincers embracing the entire market, leaving some of it virtually scarred. Consequently, we intended to search for alternative policy measures, which are able to achieve an increase in end-users' energy efficiency without the negative side-effects witnessed in case of a WCTS. In our model a subsidized reduction in the price for households' investment in energy efficiency renders just slightly more favorable results than an implementation of WCTS. However, the most effective way to accomplish all goals of environmental policy alike is to reduce the cap on emissions.

Suggested Citation

  • 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.
    • Handle: RePEc:diw:diwwpp:dp809
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    References listed on IDEAS

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    Cited by:

    1. Eirik S. Amundsen & Torstein Bye, 2018. "Simultaneous Use of Black, Green, and White Certificate Systems," The Energy Journal, , vol. 39(4), pages 103-126, July.
    2. Paul Lehmann & Jos Sijm & Erik Gawel & Sebastian Strunz & Unnada Chewpreecha & Jean-Francois Mercure & Hector Pollitt, 2019. "Addressing multiple externalities from electricity generation: a case for EU renewable energy policy beyond 2020?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(2), pages 255-283, April.
    3. Heimvik, Arild & Amundsen, Eirik S., 2021. "Prices vs. percentages: Use of tradable green certificates as an instrument of greenhouse gas mitigation," Energy Economics, Elsevier, vol. 99(C).
    4. Bye, Brita & Fæhn, Taran & Rosnes, Orvika, 2018. "Residential energy efficiency policies: Costs, emissions and rebound effects," Energy, Elsevier, vol. 143(C), pages 191-201.
    5. Barbara Schlomann & Clemens Rohde & Wolfgang Eichhammer & Veit Bürger & Daniel Becker, 2013. "Which Role for Market-Oriented Instruments for Achieving Energy Efficiency Targets in Germany?," Energy & Environment, , vol. 24(1-2), pages 27-55, February.
    6. Louis-Gaëtan Giraudet & D. Finon, 2014. "European experiences with white certificate obligations: A critical review of existing evaluations," Working Papers hal-01016110, HAL.
    7. Wirl, Franz, 2015. "White certificates — Energy efficiency programs under private information of consumers," Energy Economics, Elsevier, vol. 49(C), pages 507-515.
    8. Wittmann, Nadine, 2013. "A critical microeconomic analysis of modelling the interaction of WCTS and EU ETS," Energy Policy, Elsevier, vol. 60(C), pages 840-843.
    9. V., Oikonomou & A., Flamos & S., Grafakos, 2010. "Is blending of energy and climate policy instruments always desirable?," Energy Policy, Elsevier, vol. 38(8), pages 4186-4195, August.
    10. Abrell, Jan & Weigt, Hannes, 2008. "The Interaction of Emissions Trading and Renewable Energy Promotion," MPRA Paper 65658, University Library of Munich, Germany.
    11. Jiang, Lan & Meng, Ming, 2024. "Optimal production decision of hybrid power generation enterprises in multi-quota policy coupled markets," Energy Economics, Elsevier, vol. 134(C).
    12. repec:aen:eeepjl:eeep4-2-strunz is not listed on IDEAS
    13. Du, Minzhe & Wu, Fenger & Luo, Lichun & Wang, Qiya & Liao, Liping, 2025. "Spatial effects of the market-based energy allocation on energy efficiency: A quasi-natural experiment of energy quota trading," Energy, Elsevier, vol. 318(C).
    14. Franz Wirl, 2019. "Incentivizing Energy Efficiency under Private Information: The Social Optimum," The Energy Journal, , vol. 40(6), pages 1-22, November.
    15. Strunz, Sebastian & Gawel, Erik & Lehmann, Paul, 2014. "Towards a general "Europeanization" of EU Member States' energy policies?," UFZ Discussion Papers 17/2014, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    16. repec:aen:eeepjl:eeep4_1_giraudet is not listed on IDEAS
    17. Arild Heimvik & Eirik S. Amundsen, 2019. "Prices vs. percentages: use of tradable green certificates as an instrument of greenhouse gas mitigation," CESifo Working Paper Series 7521, CESifo.
    18. Sun, Yanming & Shen, Simiao & Zhou, Chuanyu, 2023. "Does the pilot emissions trading system in China promote innovation? Evidence based on green technology innovation in the energy sector," Energy Economics, Elsevier, vol. 126(C).

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