Tradable Green Certificates as a Policy Instrument? A Discussion on the Case of Poland

Quota obligation schemes based on tradable green certificates have become apopular policy instrument to expand power generation from renewable energy sources(RES). Their application, however, can neither be justified as a first-best response toa market failure, nor, in a second-best sense, as an instrument mitigating distortionaryeffects of the emissions externality, if an emissions trading system exists that fully coversthe energy industry. We study how ancillary reasons, in form of overcoming various barriersfor RES use and establishing beneficial side-effects, such as industry development,energy security, and abatement of pollutants not covered under the ETS, apply to thescheme recently introduced in Poland. While setting substantial expansion incentives,an advantage for local industry or job-market development or energy security can hardlybe seen. With rising power prices for end consumers and awareness that the extra rentsfrom the schemes mostly accrue to foreign investors and renewable and polluting generators,we expect a negative impact on social acceptance for RES and RES deploymentsupport policies.