This paper analyzes tradable green certificate markets, where producers investing in new renewable capacity receive certificates based on their production. These are sold to electricity retailers, who are required to buy certificates in an amount proportional to their total sales. To assess the...

We develop a dynamic model where heterogeneous firms take investment decisions depending on their beliefs on future carbon prices. A policy-maker announces a forward-looking carbon price schedule but can decide to default on its plans if perceived transition risks are high. We show that weak...