An assessment of cost-efficiency differences between feed-in-tariffs and tradable green certificates from a governmental perspective

Abstract: The increasing environmental threat because of unsustainable pollution levelshave forced E.U. to take further actions by enforcing directives in the electricity sector. The E.U. directives, enforced in 2002, aim to increase the level of electricity produced from renewable sources. In order to fulfill their received national target of green electricity, the E.U. members have, in most cases, either adopted a feed-in tariff or tradable green certificates. Since it is in a government’sinterest to minimize expenditure while still maximizing incentives when adopting a policy, this study has evaluated the cost-efficiency differences of a FIT and aTGC from a governmental perspective. This has been done by using two different models, one which measures total governmental expenditures in the energy sector and one which only measures the subsidies in the energy sector. The findings suggest that a TGC can be up to 159% more cost-efficient than a FIT, depending on how it is measured. The total expenditure model could establish the costefficiency differences with a significance of 5%, while the subsidy model could not establish the differences on a satisfying significance level