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Department of Economics, University of Bergen Working Papers in Economics, Department of Economics, University of Bergen

No 04/16:
Market power in interactive environmental and energy markets: The case of green certificates

Eirik Schrøder Amundsen () and Gjermund Nese ()

Abstract: A market for Tradable Green Certificates (TGCs) is strongly interwoven in the electricity market as the producers of green electricity are also the suppliers of TGCs. Therefore, strategic interaction may result. We formulate an analytic equilibrium model for simultaneously functioning electricity and TGC markets, and focus on the role of market power (i.e. Stackelberg leadership). One result is that a certificate system faced with market power may collapse into a system of per unit subsidies. Also, the model shows that TGCs may be an imprecise instrument for regulating the generation of green electricity.

Keywords: Renewable energy; Electricity; Green Certificates; Market power; (follow links to similar papers)

JEL-Codes: C70; Q28; Q42; Q48; (follow links to similar papers)

18 pages, June 27, 2016

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