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We discuss the analytical effects of introducing emission permits and green certificates and the corresponding quotas as regulatory mechanisms to, respectively, reduce emissions from electricity production and ensure a certain deployment of renewable energy. The different case studies in this paper show that both instruments can be used in order to reach an emission goal or a goal of renewable energy. However, the combination of these instruments and the way they are used, is shown to be important for the price faced by consumers. It is shown that the effect on the consumer price is not an unambiguous increase with the introduction of a green quota. There is a choice between quotas leading to a lower consumer price and quotas leading to a higher consumer price. As a result of this it is shown that it is always optimal to reach a renewable energy deployment goal by the use of green certificates. However, to reach an emission goal it is sometimes most favourable, with respect to consumer prices, to use green certificates and sometimes to use emission permits.

The current trend of liberalising the power markets is combined with ambitious deployment plans for power production based on renewable energy supplies. A new policy scheme to ensure this extension has been developed in the form of a green certificate system, with a politically determined target of deployment. In such a system, producers of renewably based electricity receive tradable certificates in proportion to the electricity they produce. The producer can thereby sell these certificates and receive additional revenue apart from the power price. This paper studies the price and consumption effects of such a system. With a simple model we show that the effects are ambiguous. This ambiguity is caused by the interaction between the two markets. Therefore, the green certificate system is difficult to manage if the State has parallel energy targets, such as a desired deployment of renewably based energy and a stabilisation or reduction of the energy consumption. In addition, this complicates the regulation through a deployment target of renewably based power production, as the regulator has to be aware of the different effects, which follow a specific target. Until now, these effects have not been considered in the analyses of the green certificate system when introducing the system, even though it might have considerable consequences for the success of the system.