Louis-Gaëtan Giraudet

Efficiency and distributional impacts of tradable white certificates compared to taxes, subsidies and regulations

Tradable White Certificates (TWC) schemes, also labelled Energy-Efficiency Certificates schemes, were recently implemented in Great Britain, Italy and France. Energy suppliers have to fund a given quantity of energy efficiency measures, or to buy so-called white certificates from other suppliers who exceed their target. We develop a partial equilibrium model to compare TWC schemes to other policy instruments for energy efficiency, i.e., energy taxes, subsidies on energy-saving goods and regulations fixing a minimum level of energy-efficiency. The model features an endogenous level of energy service and we analyse the influence of the substitutability between energy and energy-saving goods to produce the energy service, as well as the influence of the elasticity of demand for the energy service. We show that if the level of energy service consumption is fixed, a TWC scheme is as efficient as an energy tax, but that it is much less otherwise because it does not provide the optimal incentive to reduce the consumption of energy service. This inefficiency is worsened if energy suppliers targets are fixed rather than proportional to the suppliers current output. On the other hand, compared to taxes, a TWC scheme allows reaching a given level of energy savings with a lower increase in the consumers energy price, which may ease its implementation.

Global sensitivity analysis of an energy-economy model of the residential building sector

In this paper, we discuss the results of a sensitivity analysis of Res-IRF, an energy-economy model of the demand for space heating in French dwellings. Res-IRF has been developed for the purpose of increasing behavioral detail in the modeling of energy demand. The different drivers of energy demand, namely the extensive margin of energy efficiency investment, the intensive one and building occupants, behavior are disaggregated and determined endogenously. The model also represents the established barriers to the diffusion of energy efficiency: heterogeneity of consumer preferences, landlord-tenant split incentives and slow diffusion of information. The relevance of these modeling assumptions is assessed through the Morris method of sensitivity analysis, which allows for the exploration of uncertainty over the whole input space. We find that the Res-IRF model is most sensitive to energy prices. It is also found to be quite sensitive to the factors parameterizing the different drivers of energy demand. In contrast, inputs mimicking barriers to energy efficiency have been found to have little influence. These conclusions build confidence in the accuracy of the model and highlight occupants behavior as a priority area for future empirical research. We perform a sensitivity analysis of a model for space heating in dwellings.We do a Monte Carlo analysis and use the Morris method to find important inputs.The most important input is energy price.We further test the robustness of the ranking and the screening.

Energy Efficiency Policy with Price-quality Discrimination

We compare a range of energy efficiency policies in a durable good market subject to both energy-use externalities and price-quality discrimination by a monopolist. We find that the social optimum can be achieved with differentiated subsidies. With ad valorem subsidies, the subsidization of the high-end good leads the monopolist to cut the quality of the low-end good. The rates should always be decreasing in energy efficiency. With per-quality subsidies, there is no such interference and the rates can be increasing if the externality is large enough relative to the market share of low-type consumers. Stand-alone instruments only achieve second-best outcomes. A minimum quality standard may be set at the high-end of the product line if consumers are not too dissimilar, otherwise it should only target the low-end good. An energy tax should be set above the marginal external cost. Likewise, a uniform ad valorem subsidy should be set above the subsidy that would be needed to specifically internalize energy-use externalities. Lastly, if, as is often observed in practice, only the high-end good is to be incentivized, a per-quality schedule should be preferred over an ad valorem one. An ad valorem tax on the high-end good may even be preferred over an ad valorem subsidy if the externality is small enough and low-end consumers dominate the market.

On the Road to a Unified Market for Energy Efficiency: The Contribution of White Certificates Schemes

White certificates schemes mandate competing energy companies to promote energy efficiency with flexibility mechanisms, including the trading of energy savings. So far, stylized facts are lacking and outcomes are mainly country-specific. By comparing results of British, Italian and French experiences, we attempt to identify the core determinants of their performances. We show that (i) white certificates schemes are depicted in theoretical works as mandatory subsidies on energy efficiency goods recovered by an end-use energy tax, whereby white certificates exchanges are not a central feature; (ii) at current stages, existing schemes are cost-effective and economically efficient, with large discrepancies though; (iii) the hybrid subsidy-tax mechanism seems valid but conditional to cost pass through permissions; otherwise, obliged energy companies merely promote information on the “downstream” side (i.e. at the consumer level); (iv) although white certificates exchange between different types of actors involved can be important as in Italy, trade among obliged companies is negligible; instead, flexibility sustains vertical relationships between obliged parties and “upstream” partners (i.e. installers, energy service companies). In this respect, we support the view that white certificates schemes are a policy instrument of multi-functional nature (subsidisation, information, technology diffusion), whose static and dynamic efficiency depends upon the consistency between a proper definition of long-term energy savings, the appropriate cost-recovery permission and a fine coordination with other instruments. We finally propose a four stages deployment pattern, along which fragmented markets for energy efficient technologies get closer to create a unified market delivering energy efficiency as a homogeneous good.