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Market power in interactive environmental and energy markets: the case of green certificates

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Eirik S Amundsen, Gjermund Nese

A market for tradable green certificates (TGCs) is strongly interwoven in the electricity market in that 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.
Original languageEnglish
JournalJournal of Institutional and Theoretical Economics
Issue number2
Pages (from-to)301-321
Number of pages21
StatePublished - Jun 2017

ID: 166464820