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Title:
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The implications of tradable green certificates for the deployment of renewable electricity: mid-term report
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Author(s):
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Published by:
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Publication date:
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ECN
Policy Studies
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1-10-1999
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ECN report number:
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Document type:
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ECN-C--99-072
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ECN publication
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Number of pages:
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Full text:
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87
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Download PDF
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Abstract:
The issue of green certificates has received much attention in the recentyear. In a system of green certificates, producers of renewable electricity
receive a certificate for each pre-defined unit of electricity produced. Such
a certificate represents the 'greenness', or in more general terms the
'societal value' of the production of electricity from renewable sources. By
issuing green certificates, two different markets are created for producers
of renewable electricity: the market of physical electricity, on which they
have to compete like any other electricity producer, and the market of green
certificates. Demand for green certificates can originate from several
sources. There might be a voluntary demand of consumers (e.g. by green
pricing). Demand can also be imposed by the government on consumers or other
actors in the electricity supply chain (generators, distributors, suppliers)
via an obligation to generate, transmit, deliver or buy a certain amount of
green certificates. The government itself can also act as a buyer of green
certificates, e.g. by securing a minimum price or by a tendering procedure.
In practice, demand might come from a combination of these sources. Most
current discussions and analyses on this issue take demand from an obligation
as a starting point. This is also the case in this report. Proponents of a
green certificate system regard it as an important incentive scheme for
renewables in a liberalised market. Since many questions on the appropriate
design of a green certificate system and the impacts on the deployment of
renewable electricity sources are, as yet, unanswered, the European Union
(EU) decided to support a project to investigate these issues. In this report
the results of the first six months of this project 'The Implication of
Tradable Green Certificates on the Deployment of Renewable Electricity are
summarised. Aspects of tradable green certificate systems that have been
investigated are included. The similarities and differences of green
certificate systems that currently exist or are discussed within the several
Member States; the effects of interaction with other incentive schemes for
renewables; and the effects of interaction with possible climate change
policies. Some preliminary conclusions can be drawn. The issue of green
certificates is receiving increasing attention in several Member States (the
Netherlands, Denmark, Belgium, Germany, Italy, Finland and the UK) from the
side of the Government as well as the industry. Practical issues that are
relevant for national systems are widely discussed and tackled in these
countries. International trading is prepared by a group of utility companies
from several EU Member States. Interaction with other incentive schemes is
possible, but green certificate systems should be carefully designed to avoid
unintended consequences, on the national level as well as on the
international level. Interaction with climate change policy is an important
issue. If the external value of the generation of renewable electricity is
reduced to its value to avoid climate change, the tradability of green
certificates is justified, and it can be expected that green certificate
systems will be transformed and incorporated into a system of tradable
climate change emission quota. However, this will not do justice to the
remaining extemal values of renewable electricity. Part of these remaining
values (e.g. emission of acid, job creation, diversification etc.) are
related relatively more to the location of production than the benefit of
avoiding climate change emissions. A question is whether making these values
tradable all over Europe is justified. 21 refs.
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