Research on tradable green certificate contracts under the renewable portfolio standard

The implementation of renewable portfolio standards inevitably affects the strategic behavior and performance of tradable green certificate (TGC) market participants and brings policy risks and market risks. Contract is considered an effective governance tool to avoid the risks of TGC trading and helps TGC market participants to make scientific decisions. The article built a TGC contract model while considering the uncertainty of TGC supply and demand and provided a scientific analysis for designing TGC contracts. Finally, a numerical example was given to verify the optimal solution of the TGC contract model. The main results of this study are as follows: (1) higher electricity retail price could contribute to increasing the optimal trading volume and price of the TGC contract; (2) an increase in the wholesale price of electricity could decrease the optimal trading price of the TGC contract, but its impact on the optimal trading volume depends on the quota ratio designed by the government; (3) the impact of unit fines on the TGC contract is completely different from that of a lower price limit, where a low unit penalty and a high lower price limit for the TGC trading system could improve the trading volume of the TGC contract while reducing its price; and (4) transaction costs inhibit the trading volume of TGC contracts, but the impact on the optimal price depends on the size of transaction costs shared by different market participants; the transaction costs should be equally borne between the different market participants in order to eliminate the impact of transaction costs on the trading price of the TGC contract.