Luis Mundaca

This paper provides an empirical analysis of
market behaviour under ‘Tradable White Certificate’
(TWC) schemes. It focuses on the entire set of ‘flexibilities’
granted to obliged parties to meet a mandatory
energy-saving target cost-effectively, i.e. range eligible
measures, eligible end-use sectors, banking provision,
market engagement of non-obliged parties, and trading as
such. We found that market behaviour responds to the
unique design and context in which TWC schemes are
implemented. Contrary to expectations, limited trading is
observed so the ‘to-trade-or-not-to-trade’ dilemma is
further analysed. A real TWC market has emerged only
in Italy, where obliged parties (i.e. energy distributors)
show preference towards ‘to-trade’. In Great Britain and
France, an autarky compliance approach is identified,
with obliged parties (i.e. energy suppliers) showing preference
towards ‘not-to-trade’ driven by, among many
factors, commercial benefits of non-trading (e.g.
increased competitiveness). At the same time, results
show clearer indications of cost-effectiveness for Great
Britain than for Italy. In general, high energy-saving effectiveness
is observed, but low ambitious saving targets
and pitfalls in the regulatory framework need to be
considered to further develop TWC markets. Initial
market and institutional conditions strongly suggest that
trading might not be an immediate outcome. Ambitious
energy targets can trigger a more dynamic usage of all
flexibilities by eligible parties and thus active behaviour
in TWC markets.