Economics at your fingertips  

Prices vs. percentages: use of tradable green certificates as an instrument of greenhouse gas mitigation

Arild Heimvik and Eirik S. Amundsen

No 7521, CESifo Working Paper Series from CESifo Group Munich

Abstract: The paper analyzes the problem of achieving a target path of emission reductions in the electricity sector, using a scheme of tradable green certificates (TGC). There are two types of generation, renewable and fossil. The latter causes the emissions. The paper also examines effects from emission regulation on construction of new renewable generation capacity. Outcomes are compared with an emission fee and a subsidy. The analytical results are simulated with a numerical model and social surplus are calculated for the different instruments. Two versions of the percentage requirement are devised for the TGC scheme. Results show that the target path of emission reductions is achievable, but incentives for new renewable generation capacity will be sub-optimal, regardless of the version of the percentage requirement. The TGC scheme is neither the most accurate nor the most cost-efficient, instrument but it does lead to a smaller reduction of social surplus than a subsidy.

Keywords: emission regulation; energy policy; green certificates; Pigouvian taxes; subsidies (search for similar items in EconPapers)
JEL-codes: C70 Q28 Q42 Q48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

Page updated 2019-10-22
Handle: RePEc:ces:ceswps:_7521