Tradable White Certificates Research Articles

A game theoretic approach for tradable white certificates regarding energy rebound and government intervention

In recent decades, many government administrations have tracked energy efficiency programs (EEPs) against environmental concerns. This was done so that it could potentially be useful as a supportive mechanism for smart technologies applied under the smart city concept. To facilitate this, tradable white certificates (TWCs) have been implemented as popular financial instruments used by energy-intensive sectors to boost cleaner production. In this study, we address an industrial EEP development with a TWC instrument as a multi-agent problem. We study this problem for the first time in the context of a supply chain that includes a manufacturer, an energy producer, and household energy consumers. Furthermore, we explore a new monopolistic pricing model for energy services and energy-efficient products, regarding the rebound effect, energy consumption, and social welfare. Additionally, we discuss two revenue-cost-sharing contracts and compare them as contracts using a comprehensive parametric and experimental analysis. The results show that the second proposed contract has some advantages over the first one. However, the second contract leads to less production than the first one does, while at the same time leading to less social welfare. Also, the findings suggest that the second investigated contract is a more appropriate instrument for the obligated parties than the first one when the aim is to improve the performance of TWC schemes. These findings can provide better circumstances for governance to optimize the critical parameters’ level on TWC schemes with the lowest analytical cost.Graphical abstract

Making tradable white certificates trustworthy, anonymous, and efficient using blockchains

Fossil fuel pollution has contributed to dramatic changes in the Earth’s climate, and this trend will continue as fossil fuels are burned at an ever-increasing rate. Many countries around the world are currently making efforts to reduce greenhouse gas emissions, and one of the methods is the Tradable White Certificate (TWC) mechanism. The mechanism allows organizations to reduce their energy consumption to generate energy savings certificates, and those that achieve greater energy savings can sell their certificates to those that fall short. However, there are some challenges to implementing this mechanism, such as the centralized and costly verification and control of energy savings. Moreover, the verification process is not transparent, which could lead to fraud or manipulation of the system. Therefore, in this paper, we propose a blockchain-based TWC mechanism to automatically create, verify, and audit the TWC certificates. In addition, we propose a smart-contract-based TWC trading mechanism that enables traders to trade their TWCs without exposing their private information in an untrusted environment. Evaluations show that the proposed TWC framework is scalable for 1000 TWC traders simultaneously, and optimization problem can be solved in less than 120ms. Moreover, it has been shown that Polygon Matic incurs least gas cost compared to other blockchain-based solutions.

Assessing the influence of time-dependent power grid efficiency indicators on primary energy savings and economic incentives for high-efficiency cogeneration

In Italy, the economic support scheme for high-efficiency cogeneration annually provides tradable White Certificates to new constructed or refurbished high-efficiency cogeneration plants over a period of 10 years, proportionally to their annual primary energy saving. In contrast to the legislation currently in force, which assumes the power grid efficiency constant, this paper aims at assessing the adoption of a time-dependent approach, based on the use of the thermoelectric-based power grid efficiency, for evaluating the primary energy saving ensured by high-efficiency cogeneration as well as the relating economic incentives. The case study being analysed includes two 5.5 kWel micro-cogenerators installed in Naples (South Italy). Beyond the conventional, three scenarios have been outlined, depending on the time accuracy adopted (yearly, monthly and hourly basis). Starting from 2016, the scenarios have been replicated over the ten-year incentive period. In particular, the annual average thermoelectric-based power grid efficiency has been forecasted from 2021 to 2025. Following the innovative approach proposed in this study, the White Certificates would have increased by 9.2% in 2016, by 6.1% in 2017 and by 6.1% in 2018 too, thus fostering the achievement of the targets about high-efficiency cogeneration at national level.

A Game Theoretic Approach for Tradable White Certificates Regarding Energy Rebound, Efficiency Improvement, and Government Intervention

A Game Theoretic Approach for Tradable White Certificates Regarding Energy Rebound, Efficiency Improvement, and Government Intervention

Framework for Energy Efficiency White Certificates in the Emirate of Abu Dhabi

Abstract Energy efficiency in the demand side is considered one of the cheapest ways to achieve reductions in Green House Gases emission, as well as to avoid heavy investments in production, transmission and distribution of electricity. In the context of the Emirate of Abu Dhabi, UAE, where buildings (residential, office, retail and villas) consume about 87% of the electricity, most of which is devoted to indoor air-conditioning, energy efficiency has a huge potential for development. Under the current political/economical scenario, a series of measures to diversify the economy and attract expatriates are in place. These include heavy subsidies on retail electricity prices—which has the side-effect of limiting the economic feasibility of investments in energy efficiency. In this study, a series of building retrofits were tested on a model of the average office building in the Emirate. The best performing retrofit was identified to be the chiller's Coefficient of Performance (COP) improvements, having the lowest cost/benefit ratio and resulting in an overall annual electricity savings of around 12%. Under the current subsidized electricity price, investments in energy efficiency of existing buildings are not attractive for the owner-consumer, as over the lifecycle of the measure, the return on investment is low or negative. In this paper we attempt to assess the applicability, in the Emirate of Abu Dhabi, of energy saving obligations and tradable white certificates as a mechanism to enable investment in demand-side energy efficiency and achieving average investment returns of 7% over a 25 years horizon. The application of white certificates can enable the market of energy efficiency to develop in the Emirate. The economic return of applying a chiller retrofit under the studied white certificate scenario avoids the increase of 17% of current electricity prices.

Energetic and economic assessment of cogeneration plants: A comparative design and experimental condition study

In the present paper, the nominal design data and the experimental data of eleven industrial cogeneration power plants, based on different prime mover technologies and actually in operation in Italy, have been compared. The aim of the study is to compare the expected energetic and economic results with the real performance and economic profitability of the plants in operation: the analyses have highlighted that, in the design phase, the simple payback time is usually underestimated. An assessment of the European incentives policy on cogeneration has also been undertaken, focusing on Italian legislation, which foresees a tax reduction for fuel and Tradable White Certificate support mechanisms: these incentives allow an average SPB (Simple PayBack) reduction of about 15–20%. A sensitivity analysis on the SPB has also been performed, changing the fuel and maintenance costs, and the thermal and electrical energy prices, and the particular features of the different CHP (Combined Heat and Power) technologies have been pointed out.

Turkey's energy efficiency assessment: White Certificates Systems and their applicability in Turkey

The last decade has seen an increase in the importance of energy efficiency and the sustainable use of energy resources due to their significant benefits for reducing a country's dependence on foreign energy resources and increasing awareness on environmental problems. Turkey aims to reduce its energy intensity by 20% up to 2023, and in order to accomplish this target, the country plans to use energy more effectively in various industries and develop financial mechanisms for energy efficiency. Although much effort has been made to improve energy efficiency, additional policies such as marked-based incentives are still necessary. This article deals with one of the many market-based energy efficiency policies, called Tradable White Certificates (WhC) or Energy Efficiency Obligations. The current situation of the energy field in Turkey and energy consumption by industries is presented first in this paper, followed by potentials for energy efficiency in each industry and energy efficiency policies. Furthermore, the theory and applicability of a WhC System is introduced and discussed in terms of market conditions, choice of obligated participants and market mechanisms and barriers for the Turkish electricity and natural gas market to benefit from the residential and industrial energy savings potential.

Special Issue on Challenges and Opportunities in the 21st Century Energy Infrastructure

Special Issue on Challenges and Opportunities in the 21st Century Energy Infrastructure

Energy Saving Obligations and White Certificates: Ideas and Considerations for the Transport Sector

ABSTRACT A lot of policy interest and analysis has been focused on energy saving obligations on energy distributors or suppliers (mainly electricity and gas) coupled with trading of certified energy savings via tradable white certificates. While in the European Union the Energy Services Directive (2006/32/EC) also applies to transport fuels and some of the existing energy saving obligations allow certification of savings from transport projects, as of the end of 2009 no EU Member State has energy saving obligations on transport fuel distributors. The article explores the application of energy saving obligations in road transport, discussing the imposition of energy saving obligations on transport fuel suppliers, the definition of eligible technologies and projects, and considering energy saving obligations as a stand-alone tool or integrated with existing electricity and gas obligations. The article intends to open further discussion and research on the topic.

Tradable white certificates: experiences and perspectives

The term white certificates refers to policy schemes that combine an end-use energy efficiency obligation on energy companies with a trading option.After summarizing its rationale, the paper focuses on the major issues and challenges in designing and administering a white certificates mechanism based on the comparison of the major active national schemes that emerged from the dedicated 2010 IEPEC panel session.

A multi-criteria evaluation framework for tradable white certificate schemes

Recent years have witnessed regained political momentum on energy efficiency and interest in establishing markets is growing. As a result, Tradable White Certificate (TWC) schemes of differing design have been implemented in Great Britain, Italy and France. Much attention is being paid to justifying and evaluating such schemes. In this paper, we develop and apply a multi-criteria framework for evaluating TWC schemes—an approach that attempts to cover their individual design features. A broad evaluation is conducted regarding energy-saving and environmental effectiveness, economic efficiency, cost-effectiveness, transaction costs, political feasibility, administrative burden and technical change. The results show the design and performance of TWC schemes to be case and context-specific, and generalisations are thus inappropriate. This evaluation supports the cost-effectiveness modelled for the British scheme and the assumption that a TWC scheme is an economically efficient policy instrument. For the other, more complex TWC schemes, more data and experience are needed to judge their ex-post merit. On the whole, the proposed multi-criteria evaluation requires considerable data and complementary methods. However, the framework improves the understanding of the broad effects and attributes of TWC schemes. It deals with various empirical and normative aspects that can be applied in their evaluation.

Efficiency and distributional impacts of tradable white certificates compared to taxes, subsidies and regulations

Efficacité et impacts distributifs des certificats blancscomparés aux taxes, subventions et réglementations Les dispositifs de certificats blancs (CB), également nommés certificats d’économiesd’énergie, ont été récemment mis en place en Grande-Bretagne, en Italie et en France.Ils obligent les fournisseurs d’énergie à financer une certaine quantité de mesuresd’efficacité énergétique ou bien à acheter des « certificats blancs » à un fournisseurayant dépassé son objectif. Nous développons un modèle d’équilibre partiel pour comparer les CB aux autres instruments de politique publique pour l’efficacité énergétique,c’est-à-dire des taxes sur la consommation d’énergie, une subvention aux biensefficaces en énergie et une réglementation fixant un niveau minimum d’efficacité énergétique. En représentant le niveau de service énergétique de façon endogène, le modèle nous permet d’étudier l’influence de la substituabilité entre la consommationd’énergie et la consommation de biens efficaces en énergie pour produire le serviceénergétique, ainsi que l’influence de l’élasticité de la demande de service énergétique.Nous montrons que si le niveau de consommation de service énergétique est fixe, undispositif de CB est aussi efficace qu’une taxe sur l’énergie, mais qu’il l’est beaucoupmoins sinon car il ne fournit pas l’incitation optimale pour réduire la consommation deservice énergétique. Cette inefficacité est aggravée si l’objectif individuel attribué auxfournisseurs est fixe plutôt que proportionnel à leurs ventes d’énergie. En revanche, undispositif de certificats blancs permet d’atteindre un niveau d’économies d’énergiedéterminé avec une moindre hausse du prix de l’énergie qu’une taxe, ce qui peut enfaciliter la mise en œuvre.

Efficiency and Distributional Impacts of Tradable White Certificates Compared to Taxes, Subsidies and Regulations

Tradable White Certificates (TWC) schemes, also labelled Energy-Efficiency Certificates schemes, were recently implemented in Great Britain, Italy and France. Energy suppliers have to fund a given quantity of energy efficiency measures, or to buy so-called white certificates from other suppliers who exceed their target. We develop a partial equilibrium model to compare TWC schemes to other policy instruments for energy efficiency, i.e., energy taxes, subsidies on energy-saving goods and regulations fixing a minimum level of energy-efficiency. The model features an endogenous level of energy service and we analyse the influence of the substitutability between energy and energy-saving goods to produce the energy service, as well as the influence of the elasticity of demand for the energy service. We show that if the level of energy service consumption is fixed, a TWC scheme is as efficient as an energy tax, but that it is much less otherwise because it does not provide the optimal incentive to reduce the consumption of energy service. This inefficiency is worsened if energy suppliers' targets are fixed rather than proportional to the suppliers' current output. On the other hand, compared to taxes, a TWC scheme allows reaching a given level of energy savings with a lower increase in the consumers' energy price, which may ease its implementation.

Interactions of white certificates with other policy instruments in Europe

In a tradable white certificate (TWC) scheme, each certificate issued represents a certain amount of energy saved. Used in conjunction with an energy-saving obligation on certain parties in the energy supply chain and with rules for trading, monitoring and verification established, an efficient market for energy savings in sectors not covered by the European Union (EU) Emissions Trading Scheme can be established. However, a plethora of other mechanisms are already in place to promote a more sustainable use of energy in Europe. This paper analyses the interactions (both potential and realised in existing schemes) between TWCs and other policy instruments including tradable green certificates, the European Union Emissions Trading Scheme, the European Union Energy Performance in Buildings Directive as well as taxes, subsidies and loans. Measures implemented through a TWC scheme that reduce the consumption of electricity can make targets under a tradable green certificate scheme easier to attain. Where a tradable green certificate scheme contains relative targets, the target should be increased to achieve the same absolute amount of renewable power. A TWC scheme can also reduce the number of allowances electricity generators will need to surrender under the EU Emissions Trading Scheme. By reducing the available emission rights in the National Allocation Plans, this effect is possible to counteract.

White certificate schemes: Economic analysis and interactions with the EU ETS

This paper examines the economic, environmental and distributional impacts of an idealised tradable white certificate (TWC) scheme and shows how the impacts are modified when the scheme operates in parallel with the EU emissions trading scheme (EU ETS). It uses simple graphical techniques to assess whether a TWC scheme will increase, decrease or have an ambiguous effect on electricity demand, wholesale and retail electricity prices, carbon emissions and investment in energy efficiency, paying particular attention to the interpretation of ‘additionality’. Following a comparable analysis of the impact of the EU ETS, the paper examines the implications of introducing a white certificate scheme in a country that is already participating in the EU ETS. It compares the effect of this combination of instruments to that of the EU ETS operating in isolation. It concludes that there is no necessary link between the price of white certificates and marginal cost of energy efficiency investment, the price of electricity or the ability of the suppliers to eliminate free riders from their subsidy schemes. Also, a TWC scheme will make no contribution to reducing global carbon emissions unless and until it leads to a tightening of the EU ETS cap.

Tradable white certificate schemes: fundamental concepts

A number of European countries have introduced market-based instruments to encourage investment in energy efficiency improvement and achieve national energy savings targets. Some of these schemes are based on quantified energy savings obligations imposed on energy distributors or suppliers, coupled with a certification of the energy savings (via white certificates), and a possibility to trade certificates. The paper describes the concept and the main elements of a tradable white certificate scheme, where appropriate giving examples from existing schemes in Europe. It discusses design and operational features that are key to achieve the overall savings targets, such as delineation of the scheme in terms of obliged parties, eligible projects and technologies, institutional structure, and processes to support the scheme, such as measurement and verification. Finally, the paper looks at a number of open issues, most importantly the possibility of creating a voluntary market for white certificates via integration into the carbon market.

Market imperfections and economic efficiency of white certificate systems

This paper takes the view that energy markets and markets for energy efficiency have significant imperfections, including ones that cannot be repaired through prices alone. The acknowledgement of the various market imperfections, however, does not endorse automatically the use of various instruments, such as tradable white certificates (TWC). Therefore, it is necessary to clarify under what conditions a TWC system can have equal or superior effectiveness and economic efficiency as compared to other instruments. The article explains the principles of a TWC system in terms of market functioning and price formation. It also highlights some key assumptions regarding additionality of energy savings, transaction cost, free riding, target setting and regulatory predictability. Subsequently, the paper illustrates how a TWC system interacts with other energy efficiency policy instruments, in particular standards and taxes. After these explanatory sections the article turns to the modelling of actual TWC price formation in selected countries and subsequently presents a comparative assessment of a TWC system with an energy tax for Finland and the Netherlands.

Market behaviour and the to-trade-or-not-to-trade dilemma in ‘tradable white certificate’ schemes

This paper provides an empirical analysis of market behaviour under ‘Tradable White Certificate’ (TWC) schemes. It focuses on the entire set of ‘flexibilities’ granted to obliged parties to meet a mandatory energy-saving target cost-effectively, i.e. range eligible measures, eligible end-use sectors, banking provision, market engagement of non-obliged parties, and trading as such. We found that market behaviour responds to the unique design and context in which TWC schemes are implemented. Contrary to expectations, limited trading is observed so the ‘to-trade-or-not-to-trade’ dilemma is further analysed. A real TWC market has emerged only in Italy, where obliged parties (i.e. energy distributors) show preference towards ‘to-trade’. In Great Britain and France, an autarky compliance approach is identified, with obliged parties (i.e. energy suppliers) showing preference towards ‘not-to-trade’ driven by, among many factors, commercial benefits of non-trading (e.g. increased competitiveness). At the same time, results show clearer indications of cost-effectiveness for Great Britain than for Italy. In general, high energy-saving effectiveness is observed, but low ambitious saving targets and pitfalls in the regulatory framework need to be considered to further develop TWC markets. Initial market and institutional conditions strongly suggest that trading might not be an immediate outcome. Ambitious energy targets can trigger a more dynamic usage of all flexibilities by eligible parties and thus active behaviour in TWC markets.

Editorial: Tradable White Certificates—a promising but tricky policy instrument

In the wake of a steadily expanding climate policy portfolio tradable white certificates (TWCs) are an energy-efficiency policy instrument, which is receiving increasing attention from policy makers worldwide. Many policy makers regard them as an effective instrument to improve security of supply, to minimize negative environmental impacts of energy conversion and to maximize economic efficiency of climate policies. Tradable white certificates have their roots in several preceding instrumental designs. Firstly, there is a heritage of integrated resource planning (IRP), demand side management (DSM), energy-saving obligation schemes for energy utilities. IRP started already in the 1970s and was enlarged to DSM and utility obligation programs in the 1980s (e.g. Hirst 1992; Schweitzer et al. 1991; Waide and Buchner, in this volume). The second line of heritage for TWCs comes from the development of the tradable property rights. Even though the idea has been around already for more than 40 years (Coase 1960), the implementation started only to pick up in the late seventies (‘bubble-concept’, Atkinson and Tietenberg 1991) and, more seriously, with the introduction of a capand-trade system for SO2 in the USA in the eighties. Since then, a strong trend favouring market-based instruments was prominent in many OECD countries. More specifically, the existing TWC systems have many features in common with greenhouse gas emission trade systems (notably EU ETS) and with green certificate systems, such as RECs (Gillenwater 2008a, b).

Tradable white certificate schemes: what can we learn from tradable green certificate schemes?

In this paper, we analyze the experiences gained from tradable green certificate (TGC) schemes and extract some policy lessons that can lead to a successful design of a market-based approach for energy efficiency improvement, alias tradable white certificate schemes. We use tradable green certificate schemes existing in the Netherlands and Sweden as case studies. Departing from an assessment of both TGC schemes, we identify several institutional and market aspects that have affected their performance. We conduct the analysis by addressing key evaluation criteria (i.e., cost and energy effectiveness, administrative burden, technological innovation, political feasibility, and transaction costs). It is not our intention to demonstrate to the reader a normative aspect of designing tradable white certificate schemes. Rather, we identify some key policy lessons which can be summarized as: a binding long-term target must be clearly expressed in terms of policy time frame and certainty, a proper liquid market must be ensured for tradability of certificates, the scheme should be technology neutral, transaction costs should be kept low, and the energy efficiency target should not only address ‘low hanging fruits’ but also promote innovation.