Search

This paper investigates to which extent the Dutch feed-in premium scheme for on-shore wind projects has resulted in windfall profits during 2003-2018, a period in which the design of the scheme changed several times. Using Monte Carlo simulations, for 2003, 2009 and 2018, years that represent distinct scheme designs, we estimate the distributions of the required subsidy across virtually all potential on-shore wind projects, and compare them to the granted subsidies. We find that the average windfall profits of randomly drawn projects from the pool of potential investments have decreased over time, largely as a result of differentiating in the subsidy level among projects on the basis of the wind speed at the turbine's location. Despite these improvements, actual investments still experience substantial windfall profits, implying that investors successfully seek out projects that yield the highest windfall profits. Overall, the results imply that accounting for heterogeneity by differentiating in the subsidy level contributes to mitigating windfall profits.

Passenger car transportation is a major contributor to global carbon emissions. Despite a range of policy measures, the European passenger car fleet remains largely running on fossil fuels. It is questionable whether the lack of emission reductions can be attributed to a lack of consumer preferences for low-emission cars because consumers may have imperfect information about cars’ emissions and the availability of clean cars remains limited. This paper investigates the preferences of consumers for emission reductions in passenger car transport. We estimate the willingness to pay of passenger car buyers for $$\hbox {CO}_2$$CO2 emission reductions by means of a choice experiment amongst a sample of 1471 individuals that represents the Dutch adult population with the intention to buy a car. The main results are that the mean willingness to pay for emission reductions equals €199 per tonne, and that the majority of individuals is willing to pay more than the current market premium for two selected hybrid types. These results suggest there is a large market potential for emission reductions in passenger car transport. Our findings imply that providing consumers with trustworthy information can be considered a key policy tool for achieving emission reductions in passenger car transport.

To realise climate goals, many governments provide subsidies to renewable-energy investors. While these subsidy expenditures are already considerable, the share of renewable energy remains modest. Given that future targets are highly ambitious, realising the energy transition will only demand more policy interventions. What role can energy markets play in keeping the associated costs under control?This thesis aims to contribute to the organization of an efficient energy transition, by analysing energy markets and the potential problem that information asymmetry plays in causing underconsumption of non-renewables. The thesis first investigates whether energy users, who are confronted with asymmetrical information, prefer renewable energy to the extent that renewables can command a premium, which would curb the need for subsidies. Next, the thesis investigates whether the existing solution for information asymmetry, green certificates, is functioning properly. Finally, the dissertation investigates subsidy-scheme designs in relation to the asymmetrical information of the government and investors about the minimally required subsidy that makes a renewable-energy project profitable. Overall, this thesis shows that (i) many individuals are willing to contribute financially to reducing emissions, (ii) firms require financial incentives for them to be willing to contribute to reducing emissions, (iii) reducing information asymmetry can play a key role in the reduction of emissions, and (iv) improving the design of subsidy schemes can contribute to realising a cost-efficient energy transition.

Firms buy renewable energy at premiums and report environmental concerns as motivation to do so. The bulk of the literature on environmental corporate social responsibility suggests that this type of behavior even results in higher profit. However, a product-differentiation framework with perfect competition predicts that renewable energy use has no effect on profit. This paper tests this prediction by investigating the relationship between firms' renewable energy use and profit on the basis of panel data for 920 firms over 2014–2018. We do not find evidence for an impact of renewable energy use on profit. Hence, a ‘win-win’ in the form of higher profit and a better environment does not seem to exist. In addition, the results appear to suggest that firms do not have a positive willingness to pay for renewable energy as contribution to the environment. This implies that firms are only willing to contribute to climate-change mitigation through buying renewable energy when this is aligned with the profit-maximization objective.

To address the problem of information asymmetry in renewable electricity markets, European governments have introduced certification schemes. While certification appears to be an increasingly important trade mechanism for renewable electricity, it is unclear to what extent certificate markets are functioning properly. In addition, countries have chosen very different designs for their certification schemes. In order to assess the performance of markets for Guarantee of Origin certificates in twenty European countries, we construct four market performance indicators and analyse their development over 2001–2016: the churn rate, price volatility, the certification rate and the expiration rate. We also investigate the relationship between market performance and two design features of certification schemes: the public/private nature of the certifier and the presence of an international standard. We find that, despite increasing shares of renewable electricity are being certified, certificate markets suffer from poor liquidity and very volatile prices. In addition, we conclude that adopting an international standard fosters the development of certificate systems.

After the liberalisation of the gas industry, trading hubs have emerged in Europe. Although these hubs appear to be liquid market places fostering gas-to-gas competition, the efficiency of the gas market remains a topic of interest as a fair share of gas is still traded through long-term contracts with prices linked to the oil price while the number of gas suppliers to the European market is limited. In order to assess the efficiency of the gas market, we analyse the day-ahead spot price at the Dutch gas hub over the period 2011–2014. We find that the oil price had a small positive impact on the gas price. Changes in the concentration on the supply side did not affect the movement in gas prices. The availability of gas in storages and the outside temperature negatively influenced the gas price. We also find that the gas price was related to the production of wind electricity. Overall, we conclude that the day-ahead gas prices are predominantly determined by gas-market fundamentals. Policies to further integrate gas markets within Europe may extend this gas-to-gas competition to a larger region.