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

33 Pages Posted: 19 Nov 2008

See all articles by Philippe Quirion

Philippe Quirion

CIRED, International Research Center on Environment & Development, France; CNRS/EHESS

Louis-Gaëtan Giraudet

CIRED

Date Written: October 2008

Abstract

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.

Keywords: Energy Saving Policies, Energy-Efficiency Certificates, White Certificates, Rebound Effect

JEL Classification: Q38, Q48, Q58

Suggested Citation

Quirion, Philippe and Giraudet, Louis-Gaëtan, Efficiency and Distributional Impacts of Tradable White Certificates Compared to Taxes, Subsidies and Regulations (October 2008). FEEM Working Paper No. 88.2008, Available at SSRN: https://ssrn.com/abstract=1302766 or http://dx.doi.org/10.2139/ssrn.1302766

Philippe Quirion (Contact Author)

CIRED, International Research Center on Environment & Development, France ( email )

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Louis-Gaëtan Giraudet

CIRED ( email )

France

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