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ECN publication
The implications of tradable green certificates for the deployment of renewable electricity: mid-term report
Published by: Publication date:
ECN Policy Studies 1-10-1999
ECN report number: Document type:
ECN-C--99-072 ECN publication
Number of pages: Full text:
87 Download PDF  

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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