Price volatility and banking in green certificate markets

Research output: Contribution to journalJournal articleResearchpeer-review

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.
Original languageEnglish
JournalEnvironmental and Resource Economics
Issue number4
Pages (from-to)259-287
Number of pages29
Publication statusPublished - 2006

ID: 8037350