The EU electricity market: renewables targets, Tradable Green Certificates and electricity trade

Ourania Karakosta and Dimitra Petropoulou

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Several EU member states have introduced national systems of Tradable Green Certificates (TGCs), which stipulate the percentage of total energy consumption to be obtained from renewable sources. The Renewable Energy Directive sets a binding EU-wide target of 32% but without imposing legally binding national targets. To assess incentives for the choice of national percentage requirements we develop a two-country, Cournot duopoly model of the electricity market, with one “green” and one “black” supplier in each country. We show that nationally determined percentage requirements do not align with the EU-welfare maximising renewable energy target due to cross-country externalities arising from trade in electricity and the market price of TGCs and examine the direction of misalignment. Our results cast doubts on the feasibility of EU renewable energy policy in the absence of binding national targets and inform how national targets should be shaped.

Keywords: renewable energy; renewable targets; Tradable Green Certificates (search for similar items in EconPapers)
JEL-codes: F18 Q28 Q58 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2022-07-01
New Economics Papers: this item is included in nep-eec, nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Energy Economics, 1, July, 2022, 111. ISSN: 0140-9883

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Journal Article: The EU electricity market: Renewables targets, Tradable Green Certificates and electricity trade (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:114973

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