Amundsen, Eirik S. and Nese, Gjermund (2004): Market Power in Interactive Environmental and Energy Markets: The case of Green Certificates.
Download (314kB) | Preview
Markets for environmental externalities are typically closely related to the markets causing such externalities, whereupon strategic interactions may result. Along these lines, the market for Green Certificates is strongly interwoven in the electricity market as the producers of green electricity are also suppliers of Green Certificates. In this paper, we formulate an analytic equilibrium model for simultaneously functioning electricity and Green Certificates markets, and focus on the role of market power. We consider two versions of a Nash-Cournot game; a standard Nash-Cournot game where the players treat the market for Green Certificates and the electricity market as separate markets; and a Nash-Cournot game with endogenous treatment of the interaction between the electricity and Green Certificates markets with conjectured responses. One result is that a certificate system faced with market power may collapse into a system of per unit subsidies, as the producers involved start to game on the joint functioning of markets.
|Item Type:||MPRA Paper|
|Original Title:||Market Power in Interactive Environmental and Energy Markets: The case of Green Certificates|
|Keywords:||renewable energy; electricity; Green Certificates; market power|
|Subjects:||Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q28 - Government Policy
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q42 - Alternative Energy Sources
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory
A - General Economics and Teaching > A2 - Economics Education and Teaching of Economics > A21 - Pre-college
|Depositing User:||Eirik S. Amundsen|
|Date Deposited:||20. Sep 2008 04:32|
|Last Modified:||14. Feb 2013 11:23|
Amundsen, E. S. and J.B. Mortensen., 2001, "The Danish Green Certificate System: Some simple analytical results", Energy Economics 23 (5), 489-509.
Amundsen, E. S. and J.B. Mortensen., 2001, Erratum to "The Danish Green Certificate System: Some simple analytical results", Energy Economics 24, 523-524.
Borenstein, S. and J. Bushnell, 1999. "An empirical analysis of the potential market power in California's electricity industry", The Journal of Industrial Economics, XLVII (3), 285-323.
Borenstein, S., J. Bushnell, C.R. Knittel, 1999, "Market power in electricity markets: Beyond concentration measures", The Energy Journal 20 (4), 65-88.
Bye, T., 2003, "On the price and volume effects from green certificates in the electricty market", Discussion Paper 351, Statistics Norway.
Chen, Yi-Hsu, Hobbs, B., 2003, "An oligopolistic power market model with tradable NOx permits, Working paper, IEEE.
Kolstad, J. and F. Wolak, 2003, "Using environmental emission permit prices to raise electricity prices: Evidence from the California Electricity Market". Draft prepared for the 2003 POWER Conference, Department of Economics, Stanford University.