Green tradable certificates versus feed-in tariffs in the promotion of renewable energy shares

The paper analyzes the relationship between CO2 mitigation policy and promotion policies designed to deploy renewable energy sources for electricity production (RES-E). If an emission cap is the only policy target, an optimal mix consisting of high and low carbon use of fossil fuels, deployment of RES-E, and energy savings can best be achieved by either setting a uniform carbon tax or by implementing a cap-and-trade system covering all CO2 sources. An additional RES-E share target causes higher costs in achieving the cap. Conversely, a more ambitious emission target automatically increases the RES-E share. In a second step, we investigate different policies for inducing an RES-E quota. Such a quota can be efficiently achieved either by a system of tradable green certificates, budget-balanced FIT system, or budget-balancing premium system. We also show that differentiated, technology-specific FITs are not efficient.