Promoting renewable electricity generation in imperfect markets: price vs. quantity control

The search for economically effcient policy instruments designed to promote the diffusion of renewable energy technologies in liberalized markets has led to the introduction of quota-based tradable `green' certifcate (TGC) schemes for renewable power. However, there is a debate about the pros and cons of TGC, a quantity control policy, compared to guaranteed feed-in tariffs (FIT), a price control policy. In this paper we contrast these two alternatives in terms of cost effectiveness and social welfare, taking into account that electricity markets are not perfectly competitive.