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Price Volatility and Banking in Green Certificate Markets

Author

Listed:
  • Amundsen, Eirik S.

    (University of Bergen, Department of Economics)

  • Baldursson, Fridrik M.

    (Institute of Economic Studies, University of Iceland)

  • Mortensen, Jørgen Birk

    (Institute of Economics, University of Copenhagen)

Abstract

There is concern that prices in a market for Green Certificates (GCs) primarily based on volatile wind power will fluctuate excessively, leading to corresponding volatility of electricity prices. Applying a rational expectations simulation model of competitive storage and speculation of GCs the paper shows that the introduction of banking of GCs may reduce price volatility considerably and lead to increased social surplus. Banking lowers average prices and is therefore not necessarily to the benefit of “green producers”. Proposed price bounds on GC -prices will reduce the importance of banking and even of the GC system itself.

Suggested Citation

  • Amundsen, Eirik S. & Baldursson, Fridrik M. & Mortensen, Jørgen Birk, 2003. "Price Volatility and Banking in Green Certificate Markets," Working Papers in Economics 02/03, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2003_002
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    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • 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

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