Green tradable certificates versus feed-in tariffs in the promotion of renewable energy shares

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The paper analyzes the relationship between CO2 mitigation policy and promotion policies designed to deploy renewable energy sources for electricity production (RES-E). If an emission cap is the only policy target, an optimal mix consisting of high and low carbon use of fossil fuels, deployment of RES-E, and energy savings can best be achieved by either setting a uniform carbon tax or by implementing a cap-and-trade system covering all CO2 Terms of use: Documents in EconStor maysources. An additional RES-E share target causes higher costs in achieving the cap. Conversely, a more ambitious emission target automatically increases the RES-E share. In a second step we investigate different policies for inducing an RES-E quota. Such a quota can be efficiently achieved either by a system of tradable green certificates or by a budgetbalancing premium system. A budget-balancing FIT system, by contrast, is not efficient, since it generates excessive fiscal distortion. We also show that differentiated, technology-specific FITs are even more inefficient.JEL-Code: L380, L510, L940, Q280, Q420, Q550.Keywords: feed-in tariffs, tradable green certificates, premium systems, emission cap, cap and trade. IntroductionFor the period 2008-2012, Annex I countries that have ratified the Kyoto protocol are committed to an average reduction of their CO 2 emissions to 5.2% below the 1990 level.Broadly speaking, there are four ways of achieving this target: reducing the output of primary and secondary energy use and of other CO 2 -intensive products, enhancing energy efficiency (i.e. producing the same amount of output with less carbon input), substituting low-carbon fossil fuels (such as natural gas) for carbon-intensive fuels (like lignite and hard coal), and generally replacing fossil fuels by increasing the share of renewable energy sources (RES).An efficient mix of all these measures would be the optimal solution. To make the allocation of such CO 2 reduction efforts work, the marginal opportunity costs of all these measures have to be equal. Following this rule, CO 2 reductions will be maximal given a fixed amount of financial resources. To meet their joint target at the lowest possible cost, signatory countries could implement a rigorous cap-and-trade system (or charge a corresponding uniform carbon tax) covering all their CO 2 sources. If the whole world implemented a cap-and-trade system (or a uniform carbon tax) covering all sources of carbon, that of course would be bet...

Wind Electricity Subsidies = Windfall Gains for Land Owners? Evidence from Feed-In Tariff in Germany

“…They study the optimal choice of the two in a multicountry, two-sector (clean and dirty production) framework with capital mobility and find that prominent measure in the world as it has by now been adopted in over 60 countries (Requate (2014)). The REA in Germany replaced the Electricity Feed-in Act (EFA) and thus reduced investors' risk in two important dimensions.…”

“…Second, Germany uses a very common policy measure to foster the investment into RES, which is a feed-in tariff. This support scheme has now been introduced in over 60 countries (Requate (2014)). 2 The central mechanism is a guarantee for a fixed wholesale price for electricity produced by RES for usually 15 to 20 years after the installation of the plant.…”

“…Menanteau et al (2003); Haas et al (2011);Requate (2014)). Whether a price-based (such as a feedin tariff) or a quantity based system (such as tradable green electricity certificates or quotes) should be preferred to foster investment into RES is often evaluated according to three dimensions: costs, installed capacity and technological development (see Menanteau et al (2003)).…”

China's sectoral strategies in energy conservation and carbon mitigation

“…Although, in practice, most countries have adopted renewable energy supporting policies (Lipp, 2007), such as feed-in tariffs or renewable quota policies, these policies are not necessarily the most efficient option to address technology-related market failures (Requate, 2015). However, renewable energy supporting policies are warranted from a second-best perspective if the external cost of emissions is not fully internalized (Jaffe et al, 2005;Fischer, 2008).…”

“…If climate change is only attributed to the market failure associated with the negative externalities of GHG emissions, a cap-and-trade system or a carbon tax should be the first-best policy (Requate, 2015;Van der Ploeg, 2015). Additional policies only increase the abatement cost and do not lead to greater emission reduction (Goulder, 2013).…”