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Price Volatility and Banking in Green Certificate Markets

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Listed:
  • Eirik Amundsen
  • Fridrik Baldursson
  • Jørgen 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. Copyright Springer Science+Business Media, Inc. 2006

Suggested Citation

  • Eirik Amundsen & Fridrik Baldursson & Jørgen Mortensen, 2006. "Price Volatility and Banking in Green Certificate Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(4), pages 259-287, December.
    • Handle: RePEc:kap:enreec:v:35:y:2006:i:4:p:259-287
    DOI: 10.1007/s10640-006-9015-1
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    References listed on IDEAS

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    More about this item

    Keywords

    commodity speculation; electricity; environment; green certificates; marketable permits; uncertainty; Q28; Q42; Q48;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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