Scenarios for the Use of Ghg-Reduction Instruments – How Can Policy-Instruments as Carbon Emission Trading and Tradable Green Certificates Be Used Simultaneously to Reach a Common Ghg-Reduction Target?

Abstract

According to the agreed burden sharing in the EU, a number of member states have to reduce their emissions of greenhouse gases substantially. To achieve these reductions various policy-instruments – national as well as international – are on hand. Two international instruments are emphasized in this paper: tradable quotas for limiting carbon emissions and tradable green certificates for promoting the deployment of renewable energy technologies. In the analyses of these two instruments two main questions are considered: 1) Will there be any international trade in green certificates, if no GHG-credits are attached to them? 2) Will it make any difference if the EU sets the targets to be achieved by the two instruments or alternatively the individual member countries do? An incentive-analysis in which four scenarios are set up and discussed is performed for the EU member states. The main conclusion is that if no GHG-credits are attached to the green certificates there seems to be limited or no incentives for a permanent international trade in certificates. On the other hand, if GHG-credits are attached to the certificates an efficient international trade will take place regardless of whether the EU or the member countries fix the quotas. Thus, the use of international instruments as tradable green certificates and tradable emissions permits will not lead to an optimal GHG-reduction strategy unless GHG-credits are attached to the certificates.