Tradable Green Certificate Market Research Articles

Incentive-oriented power‑carbon emissions trading-tradable green certificate integrated market mechanisms using multi-agent deep reinforcement learning

Due to the stricter emission reduction and renewable energy consumption goals in China, the carbon emissions trading (CET) market and tradable green certificate (TGC) market, as key means to achieve these goals, urgently need to adjust the current operating mode timely and maximize market effectiveness by introducing adaptive incentive mechanisms. Therefore, taking the power industry as an example, an incentive-oriented power-CET-TGC integrated market simulation framework based on multi-agent deep reinforcement learning is constructed. The impact of consignment auction mechanism, traditional auction mechanism, and voluntary TGC trading mechanism on the transaction situation of each market is prospectively analyzed. The results demonstrate that with the introduction of various incentive mechanisms, the transaction scale and prices of CET and TGC markets increase, and the effectiveness of carbon reduction and renewable energy consumption is significant. Among them, auction mechanisms are valid way to promote the explicit cost of carbon emissions, and the voluntary TGC trading mechanism is an important means to enhance the clean value of green energy. In addition, it is recommended to adopt consignment auction mechanism under the short-term goal “carbon peak” of pursuing economic benefits and stable emission reduction, while traditional auction mechanisms are recommended under the long-term goal of “carbon neutrality” of urgently requiring large-scale emission reduction. Moreover, the voluntary TGC trading mechanism can achieve synergy and connection between the TGC market and the green electricity market to a certain extent. These insights can provide mechanism reference for the sustainable development and construction of CET and TGC markets.

Ownership structure and prices: A case study of the Swedish tradable green certificate market

This paper studies the ownership structure among participants in the Swedish tradable green certificate (TGC) system and its implications for TGC prices. First, we investigate cross-ownership – a situation when a firm is active on both the demand and supply sides of the TGC market – by linking suppliers and obliged parties to their parent firms. Next, we calculate indexes of market concentration that account for cross-ownership. Finally, we use detailed TGC transaction-level data to analyze differences in the prices of the TGCs traded by cross-ownership versus non-cross-ownership firms. Our results show considerable cross-ownership, with many firms active on both TGC supply and demand sides. However, even after accounting for cross-ownership, the market concentration of the entire TGC market is low and has decreased over time. Despite the absence of market concentration, our analysis of TGC prices indicates that cross-ownership firms have the ability to differentiate TGC prices from non-cross-ownership firms. Such behavior is consistent with the behavioral assumption that the ultimate owner's objective is to maximize the total profit of the portfolio of shares, and that, therefore, the pricing behavior would differ from that of a perfectly competitive firm without ownership links to other firms in the industry.

Do feed-in tariff reduction and green certificate trading effectively promote regional sustainable development？

Two main national policies, feed-in tariff (FIT) and tradable green certificate market (TGC) are adopted to support China's renewable energy (RE) development. Yet it remains an open question whether their influences effectively contribute to regional sustainable development. This study first measures the green total factor productivity (GTFP) of 31 mainland provinces from 2013 to 2020. Then, an empirical investigation is conducted to analyze the impact of China's FIT reduction and TGC policies on provincial GTFP. So far as provincial GTFP is concerned, empirical results confirm promotion effects from FIT reduction policy, and negative effects from green certificate trading practices. It also presents similar effects on provincial green technology innovation, promotion from FIT reduction, while hindering influence from TGC market. A point worth noting is that a positive effect on provincial GTFP results from a joint implementation of FIT reduction and TGC. Provincial GTFP is partially affected through RE power generation proportions. This paper's highlight lies in revealing energy policies' crucial role, such as FIT reduction and TGC markets, in regional sustainable development promotion. These policies become indispensable in China's long-term sustainability.

Trading behavior strategy of power plants and the grid under renewable portfolio standards in China: A tripartite evolutionary game analysis

China is facing the challenge of selecting appropriate policies to implement tradable green certificate (TGC) under the renewable portfolio standards (RPS). This paper proposes a tripartite evolutionary game model among thermal power plants, green power plants and the grid under the RPS and TGC policy to analyze the evolutionary stability strategies (ESSs) of unilateral subjects and systems and use numerical simulation to discuss the influence of different types of TGC purchase ratios and different trading markets on the choice of tripartite strategy. The results are as follows. (1) When the renewable energy consumption quota ratio is 21%, thermal power plants are more and more active in choosing to trade TGC as the ratio of wind power TGC and photovoltaic TGC gradually increases from 1:5 to 5:1. (2) In the TGC market where the price of wind power and photovoltaic TGC is 50 yuan, green power plants are more inclined to hold TGC; in the subsidized TGC market, where the price of wind power TGC is 190 yuan and the price of photovoltaic TGC is 650 yuan, green power plants tend to sell TGC. (3) With the price of excess green electricity consumption gradually decreased from 700 yuan/MWh to 100 yuan/MWh, the activity of three parties participating in TGC trading gradually increased, effectively activating the TGC market. Finally, from the perspective of policy management, we provide suggestions for the long-term sustainable development of the TGC market.

Assessing the policy synergy among power, carbon emissions trading and tradable green certificate market mechanisms on strategic GENCOs in China

The establishment of carbon emissions trading (CET) and tradable green certificate (TGC) markets in China will cause great alterations in the bidding behavior for generation companies (GENCOs) and affect the low-carbon transformation of power industry. In this paper, a Nash bargaining game model is constructed to assess the synergy of power, CET and TGC markets on decision behavior of non-renewable energy GENCOs, renewable energy GENCOs and power purchasers. The simulation results show that there is transition incentive effect, price interaction effect and profit blocking effect between three markets. With the introduction of emissions trading scheme and renewable portfolio standard (RPS), the scheduled power of renewable energy GENCOs will increase by 21.43%, and transaction prices will reduce to 449.58 CNY/MWh; while the scheduled power of non-renewable energy GENCOs will reduce by 4.66%, and transaction prices will increase to 443.71 CNY/MWh, which make all power generation types compete at equivalent price level. Under the current installed capacity distribution and load demand, it is the critical point when RPS is 18.7% and the benchmark value of free carbon quota for units above and below 300 MW are 0.857 tCO2/MWh and 0.959 tCO2/MWh. Once exceeded, it will affect social benefits and emission reduction efficiency.

The synergistic effect between Renewable Portfolio Standards and carbon emission trading system: A perspective of China

Renewable Portfolio Standards (RPS) and carbon emission trading (CET) system are the top-level system design of China's energy low-carbon transformation, which have great strategic significance for realizing the “carbon peak in 2030 and carbon neutrality in 2060”. At present, China's tradable green certificates market and CET market are still in the initial stage. The implementation single system may have diverse trials and errors in its initial stage, and the market activity and transaction frequency are low. Therefore, this paper aims to explore whether the synergistic effect between the two systems can effectively promote China's energy low-carbon transformation. This paper establishes the system dynamic model of the synergistic effect between the RPS and CET in China's electricity market to reveal the influence mechanism and the synergistic effect. The results show that: (1) There is a positive synergistic effect between the RPS and CET, which will change with the institutional parameters. (2) The simultaneous implementation of the RPS and CET can effectively stimulate market vitality and promote the development of the renewable energy industry. (3) Higher quota and lower benchmark price can optimize power source structure, and improve social welfare and institutional performance.

How to optimize allocation of renewable portfolio standards for renewable energy development in China?

A renewable portfolio standard is implemented to promote the development of renewable energy at a minimum cost through tradable green certificate market mechanism. Formulating a scientific and feasible renewable energy quota allocation scheme helps RPS function smoothly and optimize resource allocation. This paper proposed a bi-level programming model combined with entropy weight method to allocate renewable portfolio standard quotas with provincial heterogeneity and stakeholders' behavior, and an optimized quota allocation scheme among China's 30 provinces in 2020 was obtained. By comparing with the government's issued scheme, the following were the results under the optimized scheme: (1) Quotas in most provinces have increased, and the responsibility for renewable electricity generation is shared with the provinces with developed economy and well-constructed transmission facilities, where electricity producers can meet the quotas by purchasing tradable green certificate. (2) Quota allocation has positive effects on energy, economy, and environment. Specifically, the non-hydro renewable electricity generation increased by 43.8%, the non-hydro renewable electricity producers' profit increased by 18.4%, and the environmental pollution cost reduced by 27.9%. (3) Quota allocation equity measured by the environmental Gini coefficient increased by 14.3%. Based on these findings, some policy implications related to quota allocation and renewable portfolio standard's institutional arrangement have been put forward.

Assessing the Effects of Tradable Green Certificates and Renewable Portfolio Standards through Demand-Side Decision-Making Simulation: A Case of a System Containing Photovoltaic Power

Understanding the effect of a tradable green certificate (TGC) and renewable portfolio standard (RPS) policy mix is of great importance for sustainable renewable-energy development and carbon neutrality, given that the demand side subjects are the responsible subjects under China’s RPSs and studies from the demand-side perspective are relatively limited. To fill this gap, this paper analyzes the coupled relationship between the TGC market and the electricity market as well as the reflexivity of the TGC market. Meanwhile, on the basis of modeling TGC prices and renewable-energy uncertainty, this paper constructs a Markov decision process (MDP) model to simulate the sequential decision-making process of the demand side and further proposes a solution model based on dynamic programming and evolutionary algorithms. The results show that: (1) In addition to policy parameters such as RPS weight, TGC price caps and penalties, a preference for short-term benefits and renewable-energy uncertainty also affect transaction behaviors on the demand side. (2) Increasing RPS weight within an appropriate range can stimulate demand for renewable power and TGC, while excessively low RPS weight will result in accumulation of unsold TGC. In addition, the preference for short-term benefits can stimulate demand for renewable power and curb demand for TGC. (3) An increase in the TGC price cap can stimulate demand for renewable power and restrain demand for TGC, but this phenomenon may not exist when RPS weight is too low or responsible subjects prefer short-term benefits. (4) Setting a penalty of no less than the TGC price cap is of great significance to ensure the operation of the TGC market and RPSs.

Optimal pricing decision of tradable green certificate for renewable energy power based on carbon-electricity coupling

With the goals of carbon peaking and carbon neutrality, China's renewable energy has entered a stage of rapid development. The government gives financial and power-rate subsidies to clean power while putting great support on its construction. However, there is currently a big gap in the government's subsidy on new energy power generation, which is challenging to meet the demand for renewable energy consumption and sustainable development. In this regard, participating in the market is inevitable for renewable energy development, which is significant for promoting renewable energy power consumption and alleviating the subsidy dilemma. Considering the market-based mechanism, this paper regards the electricity market, the tradable green certificate market, and the carbon emissions allowance trading market as an integrated energy platform system that couples carbon emissions with electricity, linking generators and retailers. We consider two scenarios, including green electricity–green certificate separation and unity, and introduce the intermittency of new energy generation to construct the optimal pricing decision for this platform supply chain. We explore the optimal price of tradable green certificate for renewable power and the equilibrium demand for green power and thermal power in two circumstances. The results show that: (1) there is an equilibrium solution in various conditions. Moreover, the optimal price of green certificate in condition two, namely green electricity–green certificate unity, is higher when the on-grid price of green electricity and thermal one and the substitution effect of these two powers satisfy a certain constraint, which can stimulate generator and retailer to generate and consume green electricity as much as possible. (2) The price of carbon emissions and the responsibility weight of renewable electricity consumption both have a positive influence on the optimal price of green certificate and the share of equilibrium demands for green power, whereas intermittency of new energy generation has a negative impact on them. Adjusting the carbon price and incentive responsibility weights and taking relevant measures to reduce intermittency in different situations help to reduce thermal power demand and promote green power consumption. (3) When the prices of green certificates in diverse circumstances are in a certain interval, the impact intensity of changes in green certificate price on electricity demand will arise. It is conducive to performing the facilitative role of green certificate price on the power market better and stimulates the generation and consumption of new energy power in the carbon-electricity coupling market.

Decision on Mixed Trading between Medium- and Long-Term Markets and Spot Markets for Electricity Sales Companies under New Electricity Reform Policies

The introduction of the new round of electricity reform policies has made the electricity sales companies’ trading environment increasingly complex. In the medium- and long-term market and spot market, following the new policy-oriented optimization of trading decisions is the focus of electricity sales companies. The main objective of this study is to consider the impact of the latest policies of China’s current electricity reform on each subject of electricity trading and to propose a method for electricity sales companies to make optimal decisions on renewable energy source (RES) power and conventional energy source (CES) power mixed with power trading in the medium- and long-term and spot markets to improve the efficiency of electricity market trading, promoting the consumption of renewable energy and helping the synergistic development of the electricity market and the tradable green certificate (TGC) market. This paper first discusses the impact of the new electricity reform policies on the transactions of various subjects in the electricity market and constructs the model of the consumer utility function, the profit model of an electricity sales company, and the profit model of power generators with energy storage. Considering the complex power supply and demand relationship among the various subjects of the electricity market, a game model is established for the decision on mixed trading between the medium- and long-term market, the spot market, and the tradable green certificate market to minimize the comprehensive power purchase cost of an electricity sales company. To reduce the decision-making risk caused by the uncertainty of spot price, the prophet model is used to predict the spot price; finally, through the analysis of the decision-making model of the electricity sales companies, the optimal transaction decisions of the electricity sales companies in different trading periods and different scenarios are solved. The test results show that the proposed model can significantly improve the profitability of the electricity sales companies and provide a decision-making reference for electricity sales companies to participate in the medium- and long-term market and spot market.

How to improve the effectiveness of Chinese green certificate market? A complex network and social influence analysis

To achieve the 2030 carbon peak target and promote the development of renewable energy, China introduced the renewable portfolio standard (RPS) and tradable green certificate (TGC) trading mechanism in 2017. However, for several years, its TGC market remained depressed. To solve this issue, this paper creatively introduced social influence and complex networks into the evolutionary game model between generators to analyze the evolution of power producers’ behaviors, and to study the impacts of social influence, key institutional parameters, and network influence. The main results show that: (1) The positive intervention of public opinion is important to the vulnerable early TGC market, but its efficiency shows a marginal decline. (2) The evolution process can be accelerated through social interactions, and the strategies adopted by central firms in the network significantly influence the evolution result, especially when “TGC alliances” are formed. (3) According to the preference of social influence and profit, participants can be divided into two types: “changeable” (who favors interests), “firm” (who values social approval), and the latter has a greater market pulling effect. This paper provides implications for policymakers from new perspectives and extends the research scope of the RPS scheme and the TGC market.

The interplay of the carbon market, the tradable green certificate market, and electricity market in South Korea: Dynamic transmission and spillover effects

The carbon emission trading scheme (ETS) and tradable green certificate (TGC) system have been widely used to encourage renewable technology and mitigate greenhouse gas emissions. Previous studies have discussed the interaction between these market-based instruments and the electricity market from a theoretical perspective. This research contributes to the literature by empirically examining the interplay of carbon market, the TGC market, and electricity market using a vector autoregressive (VAR) model to investigate the price transmission between different markets. A VAR-BEKK-GARCH model, based on discrete wavelet decomposition, was used to reveal the spillover effect between the three markets over multiple time scales. Based on evidence from the partially deregulated electricity market in South Korea, we do not find a significant short-term interaction between carbon market and the TGC market through the price transmission. However, the analysis over multiple time scales demonstrates that the return spillover between the carbon market and the TGC market is positive and bidirectional in the medium-term and long-term. In addition, the policy integration may create higher price risks to the carbon market and the TGC market, resulting from long-term risk spillovers. We explain these contrasting findings and discuss implications for the future deployment of these policies.

The development of renewable energy industry under renewable portfolio standards: From the perspective of provincial resource differences

A low-carbon energy policy is an effective measure for promoting the development of renewable energy(RE). China has introduced renewable portfolio standards(RPS) and voluntary subscription for tradable green certificates(TGCs), but the market response is not significant. China's electricity trading functions at provincial-level regions, and there are differences in resources between the provinces. New policies need to consider the characteristics of each province to reduce market implementation risk for introduction and implementation. Therefore, based on the provincial characteristics of energy resource endowment in China, we construct a system dynamics(SD) model of the coupling of the RE market, consumption above quota(CAQ), and TGC market based on the structure of the sending-end grid(SG) and receiving-end grid(RG). Three types of TGC models were designed based on the scope of the TGC market. Finally, the impact of policy parameters such as the RPS target, inter-provincial transmission capacity, TGC validity period, and technology cost on the development of RE industries in both SG and RG was analyzed. The results show that the TGC market to be developed independently in various provinces in the initial stage and later expanded into a unified market. Increased RPS requirements, increased inter-provincial transmission capacity, and lower RE costs can enhance policy implementation.

Impacts of renewable portfolio standard on carbon emission peaking and tradable green certificate market: A system dynamics analysis method

With the announcement of the carbon peaking and carbon neutrality target in China as well as the launch of the nationwide green power renewable generation trading, one of the key issues is how to design an effective renewable portfolio standard (RPS) and build an efficient tradable green certificate (TGC) market. The quota that stipulates the share of electricity supplied from qualified renewable energy (RE) sources has substantial impacts on the TGC market, the electricity market, and the occurred time of carbon emission peaking. However, few studies have been reported on effectively quantifying the impacts of quota variation. Given this background, this paper presents an innovative system dynamics (SD) model to evaluate the impacts of quota variation on the trading results of the TGC market and the trend of carbon emissions in China for the next decade. The proposed SD model takes factors such as the accommodating capability by the power system for RE generation, the policy-driven carbon emission reduction target as well as the decreasing fixed feed-in tariff (FIT) for RE generation as constraints for the first time. These factors are quantified in the constraints based on the current RE policies and market trading mechanism in China to improve the evaluation accuracy of the SD model. Using real-world data, simulations under various scenarios are carried out to validate the feasibility and efficiency of the proposed model. The methods for further improving the design of TGC market are also further explored, which are expected to effectively guide China to achieve the carbon peaking target.

How will tradable green certificates affect electricity trading markets under renewable portfolio standards? A China perspective

Abstract Renewable portfolio standards (RPS) are important guarantees to promote renewable energy (RE) consumption. The tradable green certificate (TGC) trading mechanism is a supporting mechanism of RPS, but the rate of TGC trading is low and there is a double-metering problem of RE consumption. With the introduction of new policies in China, we innovatively take the electricity-selling side as the subject of RE consumption responsibility and biomass-based electricity-generation (BEG) projects are considered to participate in TGC trading. To explore the interaction between the TGC market and the electricity market, this paper sets up a day-ahead spot market-trading structure combining both markets under RPS and establishes a market equilibrium model. The established model is solved and validated based on the particle swarm optimization algorithm and the profits of each market player under different influencing factors are analysed. The main conclusions are as follows. (i) The established market structure and model effectively solve the double-metering problem of RE consumption, making the TGC turnover rate reach 82.97 %, greatly improving the market efficiency. (ii) Increased demand for TGC will increase demand for RE electricity. The participation of BEG projects in the TGC market can effectively improve the profit of biomass-based electricity producers (BEPs), reduce the burden of government financial subsidies and will not affect the consumption of wind-based electricity and photovoltaic-based electricity. This will help promote the rapid development of China’s RE, especially the BEG industry. (iii) Among the influencing factors, the increase in renewable-energy consumption responsibility weight and the decrease in electricity-generation cost can increase the profit of BEPs. The decline in TGC price and subsidy price will reduce the profit of BEPs. Finally, we put forward policy recommendations for China’s RPS and TGC trading mechanism. This study can provide a reference for the construction of China’s TGC market and electricity market and the development of RE.

How can the cost and effectiveness of renewable portfolio standards be coordinated? Incentive mechanism design from the coevolution perspective

Renewable portfolio standards are essential means to promote the transition to low-carbon energy by encouraging obligated subjects to purchase tradable green certificates. However, the trade-off between Renewable portfolio standards' cost and effectiveness is a challenge for the government, because they want to support the development of renewable energy at the lowest cost. This paper constructs a coevolution model for a renewable energy system incorporating Renewable portfolio standards to explore how incentive mechanisms impact the cost and effectiveness of Renewable portfolio standards. The simulation results show that with the coevolution of the RE system, Renewable portfolio standards' effectiveness gradually rises; concurrently, its cost increases first before later decreasing. However, the path-dependence of the behavioural evolution of the tradable green certificate market players hinders further improvements in Renewable portfolio standards' cost-effectiveness. In addition, high quotas and price collars close to TGC value improve the cost-effectiveness, whilst the sloped penalty mechanisms, banking mechanisms with a valid period longer than one year, and borrowing mechanisms significantly reduce costs. On this basis, the government can design dynamic incentive mechanisms to guide the market players’ behavioural evolution and decrease costs whilst also ensuring effectiveness.

How does feed-in tariff and renewable portfolio standard evolve synergistically? An integrated approach of tripartite evolutionary game and system dynamics

In order to promote the healthy development of renewable energy, China has implemented Feed-in Tariff (FIT) and Renewable Portfolio Standard (RPS). However, due to the differences in natural conditions, social economy and renewable energy development, how does FIT and RPS evolve to achieve the best policy synergy is still a controversial issue. To explore the cooperation and evolution between FIT and RPS, we establish a tripartite evolutionary game model based on regulatory agencies, renewable energy companies and power grid companies to explore the evolution of FIT and RPS, and then combine a game model and a system dynamics model to simulate and analyze the policy effects of FIT and RPS. The findings of the study are: (1) Considering three aspects of the environment, economic benefits, and the consumption of renewable energy, RPS will replace FIT as the main RE policy if the introduction of tradable green certificate market is carried out in an orderly manner. (2) The faster the rate of decline of FIT subsidies and the rate of increase of RPS quotas, the faster the power market will reach stability. (3) It is essential to formulate a reasonable incentive and penalty mechanism in the regulation of the RPS system.

Effects of herding behavior of tradable green certificate market players on market efficiency: insights from heterogeneous agent model

Tradable green certificate (TGC) scheme promotes the development of renewable energy industry which currently has a dual effect on economy and environment. TGC market efficiency is reflected in stimulating renewable energy investment, but may be reduced by the herding behavior of market players. This paper proposes and simulates an artificial TGC market model which contains heterogeneous agents, communication structure, and regulatory rules to explore the characteristics of herding behavior and its effects on market efficiency. The results show that the evolution of herding behavior reduces information asymmetry and improves market efficiency, especially when the borrowing is allowed. In addition, the fundamental strategy is diffused by herding evolution, but TGC market efficiency may be remarkably reduced by herding with borrowing mechanism. Moreover, the herding behavior may evolve to an equilibrium where the revenue of market players is comparable, thus the fairness in TGC market is improved.

Integration of tradable green certificates trading and carbon emissions trading: How will Chinese power industry do?

To promote energy conservation and emission reduction, China recently implemented a tradable green certificate market on the basis of the carbon emissions trading market. As an energy-intensive industry, the power industry is one of the leading contributors to carbon emissions in China. It is also the main participant in both the tradable green certificate market and the carbon emissions trading market. How to deal with the integration impact of the green certificate market and the carbon emissions trading market becomes a great challenge for the Chinese power industry. To improve sustainable development of Chinese power industry considering the integration impact of the green certificate market and the carbon emissions trading market, we established a simulation model based on system dynamics theory and scenario design method. The results of the study show that: (1) the implementation of tradable green certificate and carbon emissions trading mechanisms helps to control carbon emissions of the power industry, and to promote national targets of carbon emission reduction in China, (2) the optimization of electric power structure is positively related with renewable portfolio standard, and (3) the increase in the investment of renewable energy power generation technology not only brings large profit margins to power companies but also promote the achievement of sustainable development goals at the national level.

Research on tradable green certificate benchmark price and technical conversion coefficient: Bargaining-based cooperative trading

Reasonable design of the tradable green certificate (TGC) system quasi-parameters (benchmark price and technical conversion coefficient) can effectively induce the mutually beneficial cooperation of the TGC market players. However, almost no literature quantitatively estimates the quasi-parameters of TGC system. This paper uses the cooperative game theory to construct the TGC bilateral trade model between renewable energy power generators and distribution power suppliers, and then quantitatively calculates the quasi-parameters of TGC system for social welfare maximization. The results show that: (1) The constructed TGC bilateral trading model guides the mutually beneficial cooperation among market players effectively by realizing benefit expansion and redistribution; (2) The TGC benchmark price and the conversion coefficients can be quantitatively calculated based on the Nash bargaining model. Taking China for example, the benchmark price is 333 yuan/MWh, and the technical conversion coefficients of hydropower, wind power and photovoltaic power are 1, 1.2, and 1.5, respectively.