Price volatility and banking in green certificate markets

TY - JOUR

T1 - Price volatility and banking in green certificate markets

AU - Amundsen, Eirik Schrøder

AU - Baldursson, Fridrik M.

AU - Mortensen, Jørgen Birk

PY - 2006

Y1 - 2006

N2 - 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 ratinal expectations simulation model of competitive storage and specualtion 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'. Prooposed price bounds on GC-prices will reduce the importance of banking and even of the GC system itself.

AB - 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 ratinal expectations simulation model of competitive storage and specualtion 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'. Prooposed price bounds on GC-prices will reduce the importance of banking and even of the GC system itself.

U2 - 10.1007/s10640-006-9015-1

DO - 10.1007/s10640-006-9015-1

M3 - Journal article

SN - 0924-6460

VL - 35

SP - 259

EP - 287

JO - Environmental and Resource Economics

JF - Environmental and Resource Economics

IS - 4

ER -