The EU electricity market: Renewables targets, Tradable Green Certificates and electricity trade

Several EU member states have introduced national systems of Tradable Green Certificates (TGCs), which stipulate the percentage total energy consumption to be obtained from renewable sources. The Renewable Energy Directive sets a binding EU-wide target 32% but without imposing legally targets. To assess incentives for choice requirements we develop two-country, Cournot duopoly model electricity market, with one “green” and “black” supplier in each country. We show that nationally determined do not align EU-welfare maximising due cross-country externalities arising trade market price TGCs examine direction misalignment. Our results cast doubts on feasibility policy absence targets inform how should shaped.