Tradable White Certificates Research Articles

Markets for energy efficiency: Exploring the implications of an EU-wide ‘Tradable White Certificate’ scheme

Recent developments in European energy policy reveal an increasing interest in implementing the so-called ‘Tradable White Certificate’ (TWC) schemes to improve energy efficiency. Based on three evaluation criteria (cost-effectiveness, environmental effectiveness and distributional equity) this paper analyses the implications of implementing a European-wide TWC scheme targeting the household and commercial sectors. Using a bottom-up model, quantitative results show significant cost-effective potentials for improvements (ca. 1400 TWh in cumulative energy savings by 2020), with the household sector, gas and space heating representing most of the TWC supply in terms of eligible sector, fuel and energy service demand, respectively. If a single market price of negative externalities is considered, a societal cost-effective potential of energy savings above 30% (compared to the baseline) is observed. In environmental terms, the resulting greenhouse gas emission reductions are around 200 Mt CO 2-eq by 2010, representing nearly 60% of the EU-Kyoto-target. From the qualitative perspective, several embedded ancillary benefits are identified (e.g. employment generation, improved comfort level, reduced ‘fuel poverty’, security of energy supply). Whereas an EU-wide TWC increases liquidity and reduces the risks of market power, autarky compliance strategies may be expected in order to capture co-benefits nationally. Cross subsidies could occur due to investment recovery mechanisms and there is a risk that effects may be regressive for low-income households. Assumptions undertaken by the modelling approach strongly indicate that high effectiveness of other policy instruments is needed for an EU-wide TWC scheme to be cost-effective.

Transaction costs of Tradable White Certificate schemes: The Energy Efficiency Commitment as case study

This paper analyses the nature and scale of transaction costs (TCs) borne by obliged parties under a “Tradable White Certificate” (TWC) scheme. Taking the first phase of the Energy Efficiency Commitment (EEC1) in Great Britain as a case study, several sources of TCs were considered, such as search for information, persuasion of customers, negotiation with business partners, and measurement and verification activities. Information was obtained through interviews and a questionnaire distributed to obliged parties. Results show that the most significant sources of TCs were related to search for information, persuading customers and negotiating with managing agents/contractors to implement energy efficiency measures. Perceived high TCs related to contract negotiation and liability risks slightly reduced the low trading level. The scale of TCs was estimated to be around 10% and 30% of total investments costs for the lighting and insulation segments, respectively. The results indicate that, despite the presence and scale of TCs, the EEC1 scheme generated energy savings that yielded net societal benefits. Estimated financial benefits range from 0.6 to 6 p/kWh for insulation and lighting savings, respectively. When avoided external costs due to electricity savings are included, estimated economic benefits range from 3 to 8 p/kWh. Several lessons from the EEC1 can be drawn for TWC schemes. Among others, it is found that informative policy instruments to raise awareness among end-users are critical if a TWC scheme is to deliver cost-effective energy savings. In all, the nature and scale of TCs under TWC schemes will differ because of a number of endogenous and exogenous determinants.

Tradable certificates for renewable electricity and energy savings

Tradable green certificates (TGCs) schemes have been developed and tested in several European countries to foster market-driven penetration of renewables. These certificates guarantee that a specific volume of electricity is generated from renewable-energy source (RES). More recently certificates (tradable white certificates (TWCs)) for the electricity saved by demand-side energy-efficiency measures (EEMs) have been introduced in some European countries. Recent advances in information and communication technology have opened up new possibilities for improving energy efficiency and increasing utilization of RESs. Use of technological resources such as the Internet and smart metering can permit real-time issuing and trading of TGCs. These technologies could also permit issuing of TWC. This paper reviews current renewable TGC and TWCs schemes in Europe and describes the possibilities for combining them in an Internet-based system. In the proposed combined tradable certificate scheme, both RESs and demand-side EEMs could bid in real time through the Internet to meet a specific obligation. The energy savings from the demand-side measures would be equivalent to the same amount of green electricity production. The paper describes the needed common targets and obligations, the certificate trading rules and the possible monitoring protocol. In particular, the paper focuses on the TWCs verification issues, including the assessment of the baseline, as these poses additional problems for TWCs compared to TGCs.