Interplay Between Tradable Green Certificates and Carbon Emissions Trading: A Literature Review

Abstract

This study focuses on the intertwined challenges of climate change and sustainability, emphasizing the role of green energy certificates (TGCs) and carbon emissions trading (CET) as crucial instruments for mitigating greenhouse gas emissions. Countries that signed the Paris Agreement are employing these mechanisms to achieve their Net Zero Emissions (NZE) goals. Green certificates promote renewable energy investment, while carbon trading sets emission limits. However, the interaction between these systems is complex and requires careful coordination to avoid misalignment and conflicting incentives. The literature review methodology used in this study highlights how different nations implement TGCs and CET, assessing their interaction in various markets. In China, TGC-CET coupling supports renewable energy growth but faces policy redundancies, whereas in Sweden-Norway, TGC and EU ETS collaboration has proven effective, though further integration with carbon policies is needed. The Netherlands illustrates the risks of poor policy alignment between TGCs and CET, potentially undermining climate goals. The findings stress the importance of harmonizing these systems, ensuring that they function synergistically to optimize emission reductions and drive global climate policy objectives.