Evaluation of guarantees of origin as a regulatory tool for sustainable energy
Authors:   , Hamburger Ákos 
Published: October 2023

While the energy sector has an enormous impact on our life, it is one of the most polluting industries. It is therefore crucial to make a transformation and find solutions that can satisfy our energy demand and at the same time eliminate harmful effects. Importance of energy is still more sensible during the present time of war and energy crisis. Beside other solutions like reducing energy demand and energy efficiency, utilization of renewable energy sources (hereafter RES) is definitely a necessary step forward this transformation. Beside other facilitators (like eg. support schemes) guarantee of origin (hereafter GO) is a further tool related to RES electricity. GO is a standardized tradeable certificate used to prove to final consumers that the electricity supplied was generated from renewable energy sources. GO is connected to the so called ‘energy mix disclosure’ obligation of the European Union (hereafter EU) that requires electricity suppliers to inform their consumers about the energy source of the supplied energy. GOs are not connected to any support scheme, but establish a voluntary market for RES energy products. The policy aims of GO and disclosure are: (1) informing final consumers, and (2) promoting RES development. Main findings of the dissertation are the following: • GO and disclosure is a soft measure as policy tool that ensures provision of information to consumers. Indirectly, it aims to promote RES electricity. • The GO market is continuously increasing, a huge number of companies use GOs to communicate their environmental achievements. • However, GOs and disclosure has not affected RES development since the relevant EU framework was established. Until now, there was no scholarly evidence on it. Previous papers focused only on specific countries and did not have a Europe-wide approach. • The main drivers of RES electricity in Europe were identified as the following: capacity of electricity generating facilities, electricity import dependency, electricity price, per capita GDP, RES electricity support schemes, natural endowments. These factors turned to be significant, are in line with previous literature. Consumer commitmeng represented by the usage of GOs is not among drivers of RES development proved to be significant. This research brought the first evidence of insignificance of GOs as facilitator of RES development. • On the European GO market there have been oversupply and low prices that makes the policy tool ineffective in promoting RES development. • Furthermore, the present regulatory framework is unable to ensure reliable information to final consumers, because (i) enabling limitless trade of GOs regardless to physical reality; and (ii) it results in contradiction between disclosure information and official statistics. No previous paper identified this as a core issue regarding the effectiveness of GOs. • As a result of enabling limitless international trade, international flow of GOs is the multiple of international physical flows, and furthermore, the quantities of traded electricity attributes are much higher than it ever could be realised in physical flows beside the present interconnector capacities. No previous paper identified this as a core issue regarding the effectiveness of GOs. • Besides, as a market-based policy tool depending on voluntary action of consumers and other market participants, GO is efficient and fair instrument ensuring least cost. However, this advantage cannot exceed the issue of ineffectiveness. • The EU level framework on GOs and disclosure should be further improved, while interrelations with other RES electricity incentives are taken into consideration. The core issue that should be solved regarding GOs and disclosure: reliability. In order to make disclosure more reliable, at least international trade of GOs should be limited to physical reality. Besides, contradiction between official statistics and disclosure should also be terminated. Once these issues are solved, policymakers may go forward with other provisions like incentives or obligations. It is also important that GO does not stand alone. It interrelates with other policy instruments (like support schemes) and market mechanisms. Policmakers should have a wider view on the topic of RES electricity and realize that there are several positive incentives that might affect RES development: support schemes, GOs and market initiatives all might have their role. Policymakers shall analyse possible interference between these elements and establish such a framework based on this knowledge that enables synergies between them.