Scandinavian Working Papers in Economics

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

No 25/02: Provision of Renewable Energy using Green Certificates: Market Power and Price Limits

Eirik S. Amundsen () and Gjermund Nese ()
Additional contact information
Eirik S. Amundsen: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway
Gjermund Nese: Institute for Research in Economics and Business Administration (SNF), Postal: Breiviksveien 40, N-5045 Bergen, Norway

Abstract: We formulate an analytic equilibrium model for simultaneously functioning electricity market and a market for Green Certificates. The major focus of the paper is the effect of market power in a Green Certificate system. One of the main results from the analysis is that the certificate system faced with market power basically may collapse into a system of per unit subsidies.

Keywords: Firm Behavior: Theory; Oligopoly and Other Forms of Market Imperfection; Externalities; Redistributive Effects; Environmental Taxes and Subsidies; Production; Pricing; and Market Structure; Size Distribution of Firms; Electric Utilities

JEL-codes: D21; D43; H23; L11; L94

45 pages, December 19, 2012

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