Abstract

Recently a number of market-based instruments (MBIs) have been introduced to achieve sustainable energy policy goals. The most prominent MBIs are tradable permits and certificates introduced to attain CO2 or other pollutant emission reductions, to promote market-driven penetration of renewable energy sources (green certificates), and, more recently, to foster energy efficiency improvements (white certificates). These policy instruments often target parts of the same sectors (e.g. power generation). The paper identifies design and operational features that the MBIs in the energy sector share and analyses how these features have been implemented in existing schemes, especially in those with relatively longer track record. Creation of demand, organisation of markets and institutional requirements are among the issues discussed. Possible ways to integrate or link different schemes are investigated in order to achieve the maximum environmental benefit as well as a high degree of economic efficiency, including practical suggestions for a potential integration of white and green certificates and a possible further integration with CO2 emission trading; the idea of a set-aside quota of emission allowances for efficiency and renewable projects is elaborated and discussed. The advantages and challenges of a uniform trading mechanism such as CO2 trading are outlined vis-à-vis having several sectoral trading mechanisms which may be integrated to a certain degree.

Paper

Download this paper as pdf: Paper

Panels of

Panel 2. Making buildings more energy efficient

Panel 1. Strategies and integrated policies

Panel 3. Sustainable transport and land use

Panel 4. Market transformation

Panel 5. Evaluation and monitoring

Panel 6. Dynamics of consumption

Panel 7. New economic instruments