Environmental and Resource Economics

, Volume 35, Issue 4, pp 259–287 | Cite as

Price Volatility and Banking in Green Certificate Markets

  • Eirik S. Amundsen
  • Fridrik M. Baldursson
  • Jørgen Birk Mortensen


There is concern that prices in a market for Green Certificates (GCs) primarily based on volatile wind power will fluctuate excessively, leading to corresponding volatility of electricity prices. Applying a rational expectations simulation model of competitive storage and speculation of GCs the paper shows that the introduction of banking of GCs may reduce price volatility considerably and lead to increased social surplus. Banking lowers average prices and is therefore not necessarily to the benefit of “green producers”. Proposed price bounds on GC-prices will reduce the importance of banking and even of the GC system itself.


commodity speculation electricity environment green certificates marketable permits uncertainty 

JEL classification code

Q28 Q42 Q48 


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Financial support from NERP and the Norwegian Research Council (RENERGI) is gratefully acknowledged. We are grateful to two anonymous referees for helpful comments and constructive criticisms. The usual disclaimer applies.


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Copyright information

© Springer Science+Business Media, Inc. 2006

Authors and Affiliations

  • Eirik S. Amundsen
    • 1
  • Fridrik M. Baldursson
    • 2
  • Jørgen Birk Mortensen
    • 3
  1. 1.Department of EconomicsUniversity of BergenBergenNorway
  2. 2.Department of EconomicsUniversity of IcelandReykjavikIceland
  3. 3.Institute of EconomicsUniversity of CopenhagenCopenhagenDenmark

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