EUROPEAN COGENERATION CERTIFICATE TRADING - ECOCERT Demand creation and scheme interactions

Once the definition of the CHP certificate is clear, demand for it can be organised in several ways. A well-designed system of mandatory demand, by means of an obligation to acquire a certain amount of CHP certificates each year, is effective to meet the policy target. The voluntary willingness to pay for CHP certificates is likely to be small, resulting in a very thin market. Finally, instead of creating a demand solely targeted at the CHP certificates, demand could also result from interacting policy schemes such as emissions trading. Assuming that a CHP certificate scheme is going to be introduced, we would recommend to issue standard CHP certificates based on additional (‘fuel-free’) kWh output (substitution approach with standard certificates) and create demand by means of an incentive on electricity supply companies to purchase CHP certificates. The incentive could either be quantitative (an obligation) or a price incentive (fiscal or feed-in tariff). Policy goals with respect to CHP justify a support scheme that is specifically designed for CHP. Integration into other tradable schemes would underestimate the value of CHP. A standard CHP certificate scheme is also compatible with renewable certificates and does not interfere with a guarantee of origin. When introducing CHP certificates, international harmonisation is highly recommended in order to prevent undesirable and complex conversion issues.