Working Papers in Economics, Department of Economics, University of Bergen
Eirik S. Amundsen
Price Volatility and Banking in Green Certificate Markets
(), Fridrik M. Baldursson
() and Jørgen Birk Mortensen
Abstract: There is concern that prices in a market for Green
Certificates (GCs) primarily based on volatile wind power will fluctuate
excessively, leading to corresponding volatility of electricity prices.
Applying a rational expectations simulation model of competitive storage
and speculation of GCs the paper shows that the introduction of banking of
GCs may reduce price volatility considerably and lead to increased social
surplus. Banking lowers average prices and is therefore not necessarily to
the benefit of “green producers”. Proposed price bounds on GC -prices will
reduce the importance of banking and even of the GC system itself.
Keywords: Electricity; Green Certificates; Uncertainty; Commodity Speculation; (follow links to similar papers)
JEL-Codes: Q28; Q42; Q48; (follow links to similar papers)
29 pages, February 26, 2003
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