Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296168 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11079
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This study examines how the impact of Tradable Green Certificates (TGC) on profitability and investment behavior varies depending on the vertical integration status of regulated firms. Our theoretical model predicts that vertical integration does not lead to higher profits when internal pricing aligns with market values for green certificates. However, it stimulates greater investment in renewable electric capacity since it reduces the costs of the sourced certificates. Empirical analysis of the Swedish TGC system confirms these findings, revealing that vertically integrated firms did not experience profit increases. Instead, they exhibited distinct investment patterns, prioritizing cost-effective technologies like hydro and thermal capacity over more expensive renewables, in contrast to non-integrated firms.
Subjects: 
renewable energy
tradable green certificates
vertical integration
firm-level data
causal effects
profits
investments
Sweden
JEL: 
L10
L50
Q58
Document Type: 
Working Paper
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