A regulatory adjustment process for the determination of the optimal percentage requirement in an electricity market with Tradable Green Certificates

A system of Tradable Green Certificates (TGCs) is a market-based subsidy scheme designed to promote electricity generation from renewable energy sources such as wind power. Under a TGC system, the principal policy instrument is the percentage requirement, which stipulates the percentage of total electricity production (green plus black) that must be obtained from renewable sources. In this paper, we propose a regulatory adjustment process that a regulator can employ to determine the socially optimal percentage requirement, explicitly accounting for environmental damages resulting from black electricity generation. (C) 2013 Elsevier Ltd. All rights reserved.