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Promoting Renewable Electricity Generation in Imperfect Markets: Price vs. Quantity Policies

  • Madlener, Reinhard

    ()

    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Neustadt, Ilja

    ()

    (Socioeconomic Institute, University of Zurich)

  • Zweifel, Peter

    ()

    (Socioeconomic Institute, University of Zurich)

The search for economically efficient policy instruments designed to promote the diffusion of renewable energy technologies in liberalized markets has led to the introduction of quota-based tradable 'green' certificate (TGC) schemes for renewable electricity. However, there is a debate about the pros and cons of TGC, a quantity control policy, compared to guaranteed feed-in tariffs, a price control policy. In this paper we contrast these two alternatives in terms of social welfare, taking into account that electricity markets are not perfectly competitive, and show that the price control policy dominates the quantity control policy in terms of social welfare.

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Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 1/2008.

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Length: 34 pages
Date of creation: Jul 2008
Date of revision: May 2009
Handle: RePEc:ris:fcnwpa:2008_001
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  22. Amundsen, Eirik S. & Mortensen, Jorgen Birk, 2002. "Erratum to "The Danish Green Certificate System: some simple analytical results": [Energy Economics 23 (2001) 489-509]," Energy Economics, Elsevier, vol. 24(5), pages 523-524, September.
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  24. Reinhard Madlener & Ilja Neustadt, 2010. "Renewable energy policy in the presence of innovation: does government pre-commitment matter?," SOI - Working Papers 1010, Socioeconomic Institute - University of Zurich.
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