During the last two days, the economic section of the Norwegian newspaper Aftenposten has echoed existing divergences on the usefulness of a green certificates scheme, and ultimately the necessity to introduce it nationally and/or regionally with Sweden (see my previous post).
On Monday, Economics professor M. Hoel criticised the scheme for being expensive and ineffective as regards renewable energy ("Grønne sertifikater er dyr og formåløs moro med fornybar energi.") He argues that if the purpose is to reduce greenhouse gases (GHG) emissions, better do it by buying emissions allowances on the European market. The Norwegian minister in charge of energy answered today the criticisms (see picture) in an article that was a release to read. The minister is very right when he recalls that green certificates do not aim to directly reduce greenhouse gas, but to support primarily renewable energy production.
Beside any collaboration within Nordic or European countries, there are some fundamental interests in securing a national production of green energy that argue in favour of national support instruments. A "sustainable" renewable energy production capacity cannot only rely on hydropower and offshore wind farms. Other renewable energy sources should be supported. Diverse instruments exist to do so, and green certificates should be designed as to be as efficient and sustainable as they can. Climate change is a global concern, but national economies need local mitigation solutions than does not provide emissions trading. This is where green certificates and emissions trading differ fundamentally.
One interesting point that makes Hoel is on the fact that Norwegian customer could indirectly finance, through the green certificates, electricity which will be exported and sold to the continent. (Something I will come back to.) On the other hand, Norwegian customer also benefit from the revenues of the exported electricity (through notably the ownership structure of companies like Statkraft).
This is true that Norway has been a net exporter of electricity to the continent during the last few years, in particular to Denmark (forwarding to Germany before the entry into function of the NorGer cable in 2013) and to the Netherlands in particular. But this is not a historical situation, not a given fact. Norway is still importing electricity for national needs and for balancing its grid. In 2003, 2004 and 2006 for example, Norway was importing more electricity than exporting it (figures: Statnett). This is due to the fact that the national consumption is increasing along the years. Is that not better to supply this new demand with green electricity (which needs support to take off) than imported coal and conventional sources, subject to emission allowances, or even nuclear power?
To compare, the US market for green certificates is an excellent example of how the latter have contributed to finance projects falling outside the normal scope of support schemes. The voluntary market for green certificates, something totally underestimated in Europe, has proven the efficiency of such schemes. So, the question here might be: do we have properly evaluated the full potential of green certificates?
There is not one single magic cure to the problem of financing renewable energy production in competitive electricity markets. But green certificates are one of the experienced instruments to do so. There is not one single magic instrument to reduce GHG emissions around the globe, but emissions trading is the most convenient so far. Carbon capture and storage is a complementary one. There is not one single magic instrument to increase energy efficiency but a combination of several ones. The complexity comes from the need to achieve all these goals at the same time, i.e. investments in national green generation capacity, promotion of energy efficiency and reduction of greenhouse gases emissions through an international instrument. But not all the targets can be reached with the same instruments. The real question is rather how to combine them.
On Monday, Economics professor M. Hoel criticised the scheme for being expensive and ineffective as regards renewable energy ("Grønne sertifikater er dyr og formåløs moro med fornybar energi.") He argues that if the purpose is to reduce greenhouse gases (GHG) emissions, better do it by buying emissions allowances on the European market. The Norwegian minister in charge of energy answered today the criticisms (see picture) in an article that was a release to read. The minister is very right when he recalls that green certificates do not aim to directly reduce greenhouse gas, but to support primarily renewable energy production.
Beside any collaboration within Nordic or European countries, there are some fundamental interests in securing a national production of green energy that argue in favour of national support instruments. A "sustainable" renewable energy production capacity cannot only rely on hydropower and offshore wind farms. Other renewable energy sources should be supported. Diverse instruments exist to do so, and green certificates should be designed as to be as efficient and sustainable as they can. Climate change is a global concern, but national economies need local mitigation solutions than does not provide emissions trading. This is where green certificates and emissions trading differ fundamentally.
One interesting point that makes Hoel is on the fact that Norwegian customer could indirectly finance, through the green certificates, electricity which will be exported and sold to the continent. (Something I will come back to.) On the other hand, Norwegian customer also benefit from the revenues of the exported electricity (through notably the ownership structure of companies like Statkraft).
This is true that Norway has been a net exporter of electricity to the continent during the last few years, in particular to Denmark (forwarding to Germany before the entry into function of the NorGer cable in 2013) and to the Netherlands in particular. But this is not a historical situation, not a given fact. Norway is still importing electricity for national needs and for balancing its grid. In 2003, 2004 and 2006 for example, Norway was importing more electricity than exporting it (figures: Statnett). This is due to the fact that the national consumption is increasing along the years. Is that not better to supply this new demand with green electricity (which needs support to take off) than imported coal and conventional sources, subject to emission allowances, or even nuclear power?
To compare, the US market for green certificates is an excellent example of how the latter have contributed to finance projects falling outside the normal scope of support schemes. The voluntary market for green certificates, something totally underestimated in Europe, has proven the efficiency of such schemes. So, the question here might be: do we have properly evaluated the full potential of green certificates?
There is not one single magic cure to the problem of financing renewable energy production in competitive electricity markets. But green certificates are one of the experienced instruments to do so. There is not one single magic instrument to reduce GHG emissions around the globe, but emissions trading is the most convenient so far. Carbon capture and storage is a complementary one. There is not one single magic instrument to increase energy efficiency but a combination of several ones. The complexity comes from the need to achieve all these goals at the same time, i.e. investments in national green generation capacity, promotion of energy efficiency and reduction of greenhouse gases emissions through an international instrument. But not all the targets can be reached with the same instruments. The real question is rather how to combine them.
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