Price Volatility in Renewable Energy Certificate Markets: Implementing Rate Standards
Public Deposited- Last Modified
- February 26, 2019
- Creator
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Harris, Robert
- College of Arts and Sciences, Department of Economics
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Harris, Robert
- Abstract
- This paper offers a policy solution to reduce price volatility in markets for renewable energy certificates (RECs), which have been historically characterized by severe fluctuations. This volatility has resulted from a vertical demand curve for RECs. I propose replacing the current regulatory structure with an emissions rate standard that would connect RECs to carbon dioxide emissions. This paper demonstrates that a rate standard will create a downward-sloping demand curve for certificates by giving generators the option to abate pollution or buy certificates. A downward-sloping demand curve is key to limiting price volatility over time. I build a theoretical model for certificate demand based on my constructed rate standard constraint and use a stochastic certificate generation model from Coulon et al. (2015) to model the price of certificates over time. This paper then demonstrates, using a dynamic programming algorithm based on Coulon et al. (2015), that an emissions rate standard would reduce REC price volatility.
- Date of publication
- spring 2016
- Keyword
- DOI
- Resource type
- Rights statement
- In Copyright
- Note
- Funding: None
- Advisor
- Yates, Andrew
- Degree
- Bachelor of Arts
- Honors level
- Highest Honors
- Degree granting institution
- University of North Carolina at Chapel Hill
- Extent
- 34
- Date uploaded
- April 7, 2016
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