**5. Political discussion and main conclusions**

Proliferation of RES is a political question. Many measures can be implemented for it. Among them, tax incentives have been used to promote green electricity, RES for H&C and biofuels. Table 4 summaries these tax measures. This Table also shows the electricity generated from renewable sources as a percentage of gross electricity consumption, the combined heat and power generation as a percentage of gross electricity generation and the share of renewable energy in fuel consumption of transport in 2006 and the incremental points in 2006-2008.

In general, countries that show high percentages also are those that have implemented tax incentives. However, these data do not allow us to assess specifically the effects of tax incentives as they are not isolated actions but in general all countries use a mix of measures to advance the development of RES. Among these measures, the fiscal measures, the others economic measures and the non economic measures such as advertising campaigns are some of them. Among the economic measures should be highlighted feed in tariffs and financial incentives. Among the non-financial measures include the regulation especially important for buildings and fuel. Therefore, besides presenting the data in Table 4, the specific effects of the measures in each country are discussed below.

After analyzing the energy policies of EU-27 MSs, it can be pointed out that the main tax incentive used to promote green electricity by the MSs is the exemption from the payments of excises duties for electricity when the electricity is generated by RES (Germany, Romania, Slovak Republic, Denmark, Sweden, Poland and Finland). This measure has been basically used for reducing the higher prices of production of this type of energy. With the same aim, tax incentives in CCL are implemented in the United Kingdom, a reduction of the ecotax is implemented in Netherlands and some subsidies are used in Finland to offset the excise duty on electricity. Also, lower tax rates in VAT are applied in three MSs, France, Italy and Portugal. Fiscal incentives in direct tax are applied in personal income tax, corporate tax and in property tax. In direct taxes, Belgium and France have designed these incentives as a deduction on the taxable income, which is calculated as a percentage of investment cost of system installed. While Czech Republic has designed it as a tax exemption of the taxpayers income that come from generate green electricity and Luxembourg as a tax exemption to electricity producers that produce electricity exclusively for their own use. The corporate tax incentives consist mainly in a deduction of the profit obtained (Belgium, Greece and Spain), but in Czech Republic, it consist in a tax exemption of the income obtained from generating green electricity. Finally, it can be said that only Spain and Italy uses fiscal incentives in terms of a tax exemption.

Taxes Incentives to Promote Res Deployment: The Eu-27 Case 119

Literature about energy requirements for heating and cooling has largely focused on new building standards. Government interventions in heating and cooling have mainly consisted of establishing construction standards for buildings in an attempt to increase energy

The revision of the energy policies of EU-27 MSs and the government interventions concerning energy use with respect to heating and cooling, make us to conclude that 23 MSs have adopted additional measures to promote the use of RES for heating and cooling. The implementation of such measures corroborates the opinion of those experts who explain that the increased use of RES can only be achieved if it is accompanied by additional

Twelve MSs have used tax incentives with a dual purpose, to reduce investment costs and to make renewable energy profitable through a decrease in relative prices. In the first case, the use of tax deductions has the advantage of involving ex-post incentives, although they do not lower the hurdle of the initial upfront payment. Some MSs have thus resorted to reducing tax (VAT) rates to overcome this. In the second case, these measures have been relatively successful when they have been accompanied by other measures that tend to

Finally, if we focus on the tax measures to support the use of biofuels in transport, we can conclude that, until now, subsidies through partial or total exemptions have proven to be the most successful instruments to raise the share of biofuels use for transport, especially

Additionally, the tax exemptions allow steering the market by applying different reduction

However the losses in revenues for governments which have implemented tax exemptions become high with rising market volumes. As a consequence of that over the past 7 years, a number of MSs have moved towards obligation or mixed systems to lower the revenue

The actual economic crisis has forced the MSs to review the incentive measures of RES. All the measures studied are linked to tax restrictions, so that in times of deficit reduction, all

The authors acknowledge financial support received by the Andalusian Energy Agency, Fundació Roger Torné and by SEJ 132. They also acknowledge the suggestions made by the participants of the III Workshop on Public Economics and Renewable Energy, University of Seville, April 2011. Authors acknowledge the suggestions made by the reviewers. The usual

Bomb, C. McCormick, K. Deurwaarder, E. and S Kaberger, T. 2007. Biofuels for transport in Europe: Lessons from Germany and the UK, Energy Policy 35(4), 2256-2267 Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit, 2011

Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit, 2008. Legal sources on the generation of electricity from renewable energy sources.

rates to various types of biofuels by considering its effects on GHG emissions.

efficiency with respect to heating and cooling requirements.

support from government authorities.

losses.

these policies may be affected.

**6. Acknowledgement** 

disclaimer applies.

**7. References** 

increase the price of alternative energy sources.

when tax incentives are complemented by other measures.


Source: Own elaboration.

Table 4. Effects of fiscal incentives to advance RES deployment

2008 F.I. 2006 Δ2006-

2008 F.I. 2006 Δ2006-

2008

**UE-27 Green electricity Heating and Cooling Biofuels** 

Austria 16.1 -0.8 16.1 -0.8 2.2 4.9 Belgium 8.7 --- 8.7 --- 0.1 1.1 Bulgaria 6 4 6 4 0.2 0 Cyprus 0.3 0 0.3 0 0 2.1 Czech Rep. 15.1 -0.9 15.1 -0.9 0.1 0.1 Denmark 40.7 5.4 40.7 5.4 0.3 0 Estonia 10.7 -2.1 10.7 -2.1 0 0 Finland 34.9 0.7 34.9 0.7 0.4 1.8 France 3.2 -0.1 3.2 -0.1 2 3.6 Germany 12.5 0 12.5 0 6.7 -0.2 Greece 1.7 0.2 1.7 0.2 0.7 0.3 Hungary 22.4 -1.3 22.4 -1.3 0.1 3.8 Ireland 5.6 0.6 5.6 0.6 0.1 1.1 Italy 9.8 -0.3 9.8 -0.3 0.9 1.4 Latvia 42.6 -9 42.6 -9 1.1 -0.2 Lithuania 14.3 -1.6 14.3 -1.6 1.6 2.4 Luxembourg 10.9 1 10.9 1 0 2 Malta\* 0 0 0 0 0 0 Netherlands 29.9 3.7 29.9 3.7 0.4 2.1 Poland\* 16 0.9 16 0.9 0.9 2.4 Portugal 11.6 0.3 11.6 0.3 1.3 1.1 Romania 18 -8.4 18 -8.4 0.8 2 Slovakia 27.6 -3.6 27.6 -3.6 0.5 5.8 Slovenia 7.4 -0.7 7.4 -0.7 0.4 1.1 Spain 7.2 -0.2 7.2 -0.2 0.7 1.2 Sweden 8 1.6 8 1.6 4.9 1.4 UK 6.3 0.1 6.3 0.1 0.5 1.5

F.I. 2006 Δ2006-

Source: Own elaboration.

Table 4. Effects of fiscal incentives to advance RES deployment

Literature about energy requirements for heating and cooling has largely focused on new building standards. Government interventions in heating and cooling have mainly consisted of establishing construction standards for buildings in an attempt to increase energy efficiency with respect to heating and cooling requirements.

The revision of the energy policies of EU-27 MSs and the government interventions concerning energy use with respect to heating and cooling, make us to conclude that 23 MSs have adopted additional measures to promote the use of RES for heating and cooling. The implementation of such measures corroborates the opinion of those experts who explain that the increased use of RES can only be achieved if it is accompanied by additional support from government authorities.

Twelve MSs have used tax incentives with a dual purpose, to reduce investment costs and to make renewable energy profitable through a decrease in relative prices. In the first case, the use of tax deductions has the advantage of involving ex-post incentives, although they do not lower the hurdle of the initial upfront payment. Some MSs have thus resorted to reducing tax (VAT) rates to overcome this. In the second case, these measures have been relatively successful when they have been accompanied by other measures that tend to increase the price of alternative energy sources.

Finally, if we focus on the tax measures to support the use of biofuels in transport, we can conclude that, until now, subsidies through partial or total exemptions have proven to be the most successful instruments to raise the share of biofuels use for transport, especially when tax incentives are complemented by other measures.

Additionally, the tax exemptions allow steering the market by applying different reduction rates to various types of biofuels by considering its effects on GHG emissions.

However the losses in revenues for governments which have implemented tax exemptions become high with rising market volumes. As a consequence of that over the past 7 years, a number of MSs have moved towards obligation or mixed systems to lower the revenue losses.

The actual economic crisis has forced the MSs to review the incentive measures of RES. All the measures studied are linked to tax restrictions, so that in times of deficit reduction, all these policies may be affected.
