Price Volatility and Banking in Green Certificate Markets

Eirik Amundsen (), Fridrik Baldursson () and Jørgen Mortensen

Environmental & Resource Economics, 2006, vol. 35, issue 4, 259-287

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. Copyright Springer Science+Business Media, Inc. 2006

Keywords: commodity speculation; electricity; environment; green certificates; marketable permits; uncertainty; Q28; Q42; Q48 (search for similar items in EconPapers)
Date: 2006
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Working Paper: Price Volatility and Banking in Green Certificate Markets (2005)
Working Paper: Price Volatility and Banking in Green Certificate Markets (2003)
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DOI: 10.1007/s10640-006-9015-1

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