How Much Market Do Market-Based Instruments Create?: An Analysis for the Case of "White" Certificates

Ole Langniss and Barbara Praetorius ()

No 425, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: In the context of economic instruments for more energy efficiency and climate protection, tradable certificates have been investigated for renewable energy and for a number of emissions. In contrast, tradable energy efficiency - or "white" - certificates have only lately been considered as a market-based tool to foster energy efficiency as compared to standards and labelling, for example. Theoretically, there is little doubt about the advantages. In practice, however, somefundamental problems arise. Critical issues are the design of an efficient artificial market for "white" certificates, its compatibility with the European emissions trading system, the identification of a suitable target group for an energy efficiency obligation and the measurement of energy savings as compared to a reference use of energy. We use the theoretical framework of Transaction Cost Economics to elaborate these issues. We conclude that transaction costs and investment specificity will restrict markets for "white" certificates in practise. Long-term contracts rather than spot trade will be the prevailing form of governance for energy efficiency investments.

Keywords: Tradable certificates; Energy efficiency; Transaction cost (search for similar items in EconPapers)
Pages: 25 p.
Date: 2004
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Citations: View citations in EconPapers (5)

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Journal Article: How much market do market-based instruments create? An analysis for the case of "white" certificates (2006)
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