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The EU electricity market: renewables targets, Tradable Green Certificates and electricity trade

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  • Karakosta, Ourania
  • Petropoulou, Dimitra

Abstract

Several EU member states have introduced national systems of Tradable Green Certificates (TGCs), which stipulate the percentage of total energy consumption to be obtained from renewable sources. The Renewable Energy Directive sets a binding EU-wide target of 32% but without imposing legally binding national targets. To assess incentives for the choice of national percentage requirements we develop a two-country, Cournot duopoly model of the electricity market, with one “green” and one “black” supplier in each country. We show that nationally determined percentage requirements do not align with the EU-welfare maximising renewable energy target due to cross-country externalities arising from trade in electricity and the market price of TGCs and examine the direction of misalignment. Our results cast doubts on the feasibility of EU renewable energy policy in the absence of binding national targets and inform how national targets should be shaped.

Suggested Citation

  • Karakosta, Ourania & Petropoulou, Dimitra, 2022. "The EU electricity market: renewables targets, Tradable Green Certificates and electricity trade," LSE Research Online Documents on Economics 114973, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:114973
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    References listed on IDEAS

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    Cited by:

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    6. Stamatios K. Chrysikopoulos & Panos T. Chountalas & Dimitrios A. Georgakellos & Athanasios G. Lagodimos, 2024. "Green Certificates Research: Bibliometric Assessment of Current State and Future Directions," Sustainability, MDPI, vol. 16(3), pages 1-45, January.

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    More about this item

    Keywords

    renewable energy; renewable targets; Tradable Green Certificates; Elsevier deal;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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