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University of Ljubljana Faculty of Economics DOCTORAL DISSERTATION PROPOSAL Student: Renata Dombrovski Supervisor: Jože Damijan, PhD, Full Professor Ljubljana, September, 2011

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University of Ljubljana

Faculty of Economics

DOCTORAL DISSERTATION PROPOSAL

Student: Renata Dombrovski

Supervisor: Jože Damijan, PhD, Full Professor

Ljubljana, September, 2011

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DISSERTATION TOPIC: Efficient energy tax policies for promoting emergent

technologies

INTRODUCTION:

The pressure on global energy resources is high. Therefore, the current climate policy should

adopt the best measures that will limit harmful emissions, such as energy taxes, and other

policies where the direct aim is to promote renewable energy. Using time-series data from EU

countries for the period of 1990 to 2010 an extensive empirical cross-country analysis will be

conducted in order to propose the most efficient energy tax system. It is expected to find that

energy taxes in combination with tax incentives best promote implementation of solar

technologies. The purpose of this research is to empirically examine the effectiveness of

different tax instruments on implementation of solar energy technologies in EU countries.

The research focuses on the causal relationship between various energy taxes/supports,

investment costs and future savings in country / firm per year. This econometric study

explores the efficiency of all energy taxes and fiscal supports, such as lower tax rates, tax

relieves and exemptions for solar technology investments, applied within EU. Most countries

share the greenhouse gasses (GHG) emissions reduction goals. Although, their choice of tax

policies varies, depending mainly on the national priorities. Different fiscal instruments have

been used to promote clean energy. That includes difficulty in providing a renewable energy

EU policy framework, but helps in informing countries fiscal policy makers about the

efficiency of particular energy tax or incentive. Literature review gives a detailed overview of

existing empirical studies that examined the efficiency of a certain fiscal policy for promoting

emerging technologies in different countries. However, empirical model that comprises the

most efficient fiscal solutions for promoting solar technologies has not yet been proposed. A

probabilistic model will be developed in order to evaluate the solar energy implementation on

macro and micro level in EU, under energy taxes and different support mechanisms such as:

tax credits, tax incentives, governmental grants, feed in tariffs, renewable energy certificates,

carbon credits and emission trading schemes. The majority of data will be collected from

relevant statistical data sources: EEA, EUROSTAT, IMF, IBFD, OECD, the World Bank

and from official statistical databases of EU countries. Eurostat has developed a coherent

system of energy statistics. Annual data collection covers the EU-27 Member States and the

candidate countries of Croatia and Turkey. Time-series are available from 1990. The causal

relationship between energy tax/support, investment costs and future energy and money

savings in EU countries per year will be examined using time series data. Based on results of

empirical study new energy efficient tax model will be proposed. Appropriate energy tax

measures will enable countries to implement solar technologies and also to reduce greenhouse

gases emissions. Consequently, this will contribute to the policy-making process by helping

governments to implement optimal energy policies for promoting renewable technologies and

to reach their emissions target goals. The doctoral thesis will contain three interrelated

publishable papers. The main goal of first paper is to propose a new empirical model of

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optimal tax policies for promoting renewable technologies on macro and micro level. Second

paper will empirically test proposed model on macro level and third paper will empirically

analyse the efficiency of energy taxes on micro level, based on time series data set from EU

countries.

KEYWORDS: greenhouse gasses emissions, energy taxes, solar technologies, economic

development

THE FOLLOWING RESEARCH QUESTIONS HAVE BEEN DETERMINED:

Q1: Why is of great importance that countries implement emerging solar technologies?

Q2: What is the impact of energy taxes / fiscal supports on promotion of solar technologies?

Q3: How different energy taxes and supports affect costs, energy savings and greenhouse

gasses emissions due to implementation of these technologies in the short and in the long run?

Q4: How efficient are various energy tax policies? What are the most efficient tax systems

and support policies that can be used to stimulate the application of solar technologies?

Q5: What is the role of the international cooperation on innovative solar technologies in

development of clean industries?

THEORETICAL FRAMEWORK:

An increasing importance has been given to energy clean sector. According to European

Environment Agency, energy accounts for 80% of all greenhouse gas (GHG) emission in the

EU. The present system of energy policies within the EU is not sustainable. Strand (2007)

emphasizes that a major issue in the current climate policy debate is to establish the balance

between policies that would limit the emission of greenhouse gases. Such policies are carbon

taxes or cap-and-trade schemes, and measures where the direct aim is to promote renewable

alternatives to GHG emissions-generating energies. It is very important that countries develop

and implement new environmentally friendly technologies and use cleaner energy by reducing

greenhouse gases emissions (Gerlagh, 2008, Zhai et. al., 2008, Peretto, 2009, Nixon et. al.,

2010). Environmentally friendly technologies’ implementation has been examined for years,

but new approaches towards its positive economic impacts are continuously researched.

One of the first serious scientific studies (Carson, 1962) pointed to dangerous environmental

problems, but it did not consider in-depth connection between economic growth and the

environment. Further analyses of environment, economic growth and development

(Bartelmus, 1994) represent significant scientific confirmation that the current system of

development is not sustainable. Goodstein (2010) examines options for sustainable

development of clean technologies in poor countries and the role of the government in

controlling greenhouse gases emissions. There is an extensive literature in the fields of

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ecology, environmental protection, sustainable development, management (Stiglitz, 2000,

Muller, 2004, Böhringer et al., 2009, Jackson, 2010, Golusin et al., 2011), while studies that

can establish scientific based interaction between ecology, management and economy are

very rare. Črnjar and Črnjar (2009) successfully cope with that challenge and conclude that

ecological management must create cost-effective systems. Researchers are constantly trying

to find the optimal measures for creation of such systems. Dotson (2009) emphasizes the

importance of familiarizing the citizens’ with impacts of emerging energy sector on the

quality of their lives. Successful innovations have a certain goal - by influencing both the

economy and the society, they build social prosperity.

Main steps toward climate change fight are: The Vienna Convention for the Protection of the

Ozone Layer from 1985 (UNEP, 1985), The United Nations Framework Convention on

Climate Change, 1992 (UNFCCC, 1992), which recognized among other important issues

that all countries and especially developing countries need to achieve sustainable social and

economic development, changing their orientation towards application of new technologies

which will achieve greater energy efficiency for controlling GHG emissions. The next

important step is The Montreal Protocol on Substances That Deplete the Ozone Layer from

1987 (UNEP, 1987). Few years later, by signing The Kyoto Protocol (UNFCCC, 1997) -

adopted in 1997 and entered into force in 2005 - the contracting countries agreed to reduce

their collective greenhouse gas emissions by at least 5% from the 1990 level in the

commitment period from 2008 to 2012. The Kyoto Protocol introduced three market-based

mechanisms - Emissions Trading, The Clean Development Mechanism (CDM) and Joint

Implementation (JI) in order to help countries to meet their targets by reducing GHG

emissions in a cost-effective way. The 2007 United Nations Climate Change Conference held

in Bali (UNFCCC, 2007), The United Nations Climate Change Conference from 2009 held in

Copenhagen, Denmark (UNFCCC, 2009) and The United Nations Climate Change

Conference which took place in Cancun, Mexico, in 2010 (UNFCCC, 2009) delivered

important decisions toward cleaner environment future. All these conferences significantly

contribute to climate change fight, but countries still need to find the optimal financial and

taxation mechanisms for sustainable development of clean technologies and accompanying

industries. In March 2011 the European Commission (EC) adopted "A Roadmap for Moving

to a Competitive Low Carbon Economy in 2050" with the goal of keeping the climate change

below 2 degrees Celsius. Another target accepted is to obtain 80% to 95% GHG emissions

reductions by 2050 from a 1990 baseline. With the aim of reaching this target the EC

observed that, among other (EC, 2011):

- The European Union reduces its use of primary energy by 20 % by 2020;

- The European Union reaches a 20% share of its overall energy consumption in

renewable energy by 2020.

Reaching these goals will definitely require significant GHG emissions reductions. Following

this issues, this research focuses on the importance of energy taxes and fiscal supports for

implementation of solar technologies. Spread of eco policies through years indicate the

emerging need for facing the emission target challenges.

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Figure 1: International spread of environmental policies

Source: http://www.eea.europa.eu/data-and-maps/figures/international-spread-of-environmental-

policies/trend11-3g-soer2010-eps/TREND11-3G-environment-policies-spread.eps.75dpi.gif/at_download/image

The figure compares 23 environmental policy innovations between 1945 and 2005 across 43

OECD and Central Eastern European Countries. The colours represent adoption levels from

dark blue (less than 4 countries adopting the policy) to brown (more than 40 countries

adopting it). The policies are ranked by adoption rate between start year and 2005 (fastest

spreading policies first).

Significant differences among countries in using either eco taxes or other financial support

mechanisms (such as taxation of polluters and adverse technologies, lower tax rates, tax

relieves, exemptions and supports for eco-friendly technology investments) indicate that

existing energy tax system is not efficient. Cansino et al. (2010) provide an overview of the

tax incentives in the EU-27 member states to promote green electricity. A great diversity of

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tax incentives used to promote green electricity demands energy efficient and harmonized

fiscal policy framework. The goal of energy tax harmonization is to accomplish more efficient

energy application between countries and thus to set up more competitive markets. Different

countries have reached different levels of development and emerging energy investments

which is the main reason why is very difficult to harmonize the environmentally tax system

between poor and powerful economies.

Existing literature mostly deals with energy prices (Neumann et al., 2006, Zachmann, 2008,

Ma et al., 2009). These research results support mainly energy price convergence. In

comparison with existing literature on energy prices, the literature on energy tax

harmonization or convergence is limited. Bilgili (2010) analyzes tax harmonization in EU

through convergence tests, employing minimum Lagrange multiplier unit root tests with

structural breaks. Observing the data for panels, he finds that panels for oil industry tax, diesel

industry tax, oil household tax and diesel household tax converge to average total taxes of EU

countries. Time series data for individual countries give mixed results, i.e. indicate both

convergence and non-convergence results. Further studies should also include data for other

eco taxes and examine their harmonization and convergence.

Literature has dealt with financial analysis of economic impacts of different energy policy

instruments within different countries – landfill tax (Morris and Read, 2001), white

certificates for energy efficiency improvement with energy taxes (Oikonomou et al., 2008),

electricity tax (Bjertnaes et. al., 2008), pro-ecological tax (Szargut and Stanek, 2008),

emission trading schemes (Pope and Owen, 2009), tax incentives (Markandya et al., 2009),

carbon tax (Lu et. al., 2010). Other innovative tax and financial measures for emerging

technologies development should also be found and implemented in order to obtain positive

environmental and economic goals in the future. Emerging clean energy technologies’

development demands efficient financial and tax systems within countries (Dinica, 2006,

Lipp, 2007, Siriwardena et al., 2007, Strand, 2007, Hart, 2008, Vollebergh, 2008, Delucchi

and Jacobson, 2011). Falconett and Nagasaka (2010) developed a probabilistic model to

assess the effects of certain support mechanisms on the financial return of small-scale

hydroelectric, wind energy and solar PV systems. They focused on three renewable energy

support mechanisms: governmental grants, feed in tariffs and renewable energy certificates.

The results of their study indicate that the feed in tariffs is the best mechanism to increase the

profitability of solar PV systems and wind energy projects. The green certificate mechanism

is the most suitable one to increase the profitability of hydroelectric projects. Finally, they

conclude that the efficiency of the support mechanisms varies depending on stage of

development of the renewable technologies that are implemented. Newbery (2005) has

searched for the answer whether the public finance sector can introduce efficient energy tax

system. The main factors for energy taxes were defined but inadequate to explain current

energy taxes.

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The literature mainly offers only theoretical link between renewable energy and economic

development. Carley et al. (2011) make an important approach towards energy based

economic development. The GDP structure of Republic of Croatia and other developing

countries (services sector, manufacturing industry and agriculture) requires new technologies

that will enable economic prosperity and competitive position in EU. It leads to the

assumption that the financial – taxation system should be more stimulating in comparison

with EU. That goal demands detailed econometric analyses of the existing energy measures

using national level data and proposal of innovative and efficient fiscal model.

The key findings in the field of energy taxation are summarized in Appendix1. That detailed

literature review study shows that energy taxes and growing scale of fiscal supports

differently affects the GHG emission reductions and emerging technologies implementation.

In some cases, one instrument is more efficient than the other, but there is no strict rule which

combination of mechanisms each country should apply in order to achieve the future energy

saving targets. Current problem is that the majority of studies compare the efficiency of only

two or three fiscal instruments. Therefore, this study examines the efficiency of all fiscal

measures applied within EU. In addition, it proposes a new theoretical model of optimal tax

mechanism for promoting solar technologies.

Based on literature review, it has been found that energy taxes and incentives are efficient

energy policies for stimulating implementation of solar technologies. However, what is

missing is the comprehensive empirical study that will test the efficiency of all fiscal

supporting instruments for promoting renewable technologies applied in EU countries. Based

on findings from the empirical analysis, the model of the most efficient measures that

countries should adopt in order to reduce GHG emissions in a cost-effective way should be

proposed. Costs of implementation of solar technologies have to be compared to benefits,

namely reductions of greenhouse gasses emissions, solar technological innovations and

increased future energy savings. This model will contribute to practice by helping

governments to implement optimal energy policies for promoting solar technologies and to

reduce harmful emissions. Detailed and comprehensive study will significantly contribute to

science in the field of energy taxation.

METHODOLOGY:

The structure of the dissertation will consist of the theoretical part that is followed by a

description of the empirical part. Methods such as analysis, synthesis, generalization,

specialization, description, compilation, classification will be used in generating a

comprehensive overview of the existing theory from the field of energy taxes and solar

technologies. Applying both qualitative and quantitative research methods, significant results

that will further bear implications in the policy-making are expected. In order to propose the

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econometric model of optimal environmentally friendly taxes and fiscal supports detailed

review of existing empirical studies and econometric models has been done.

Using time-series data from EU countries for the period of 1990 to 2010 a probabilistic model

will be developed. The purpose of this model is to evaluate the solar energy implementation

on macro and micro level, after empirical examination of effectiveness of different EU energy

tax policy schemes. Data will be collected from relevant statistical data sources: EEA,

EUROSTAT, IMF, IBFD, OECD, the World Bank and from official statistical databases of

EU countries. EUROSTAT annual data collection covers EU-27 Member States and time-

series are available from 1990. The data collected will be analyzed in STATA using

multivariate analysis. Based on this cross-country empirical analysis new energy tax model

will be constructed.

EXPECTED FINDINGS:

The main research hypothesis indicates that energy tax policies promote emergent

technologies and reduce greenhouse gasses emissions. In order to test all hypotheses empirical

cross-country analysis will be conducted using time-series data from EU countries.

Additional hypotheses to be tested are as follows:

H01: Appropriate energy tax policy raises the price of non renewable energy.

H02: Increase in energy taxes leads to increase in innovative energy saving solutions.

H03: Clean energy solutions indicate the rising need for the emergent technologies

implementation.

H04: Energy taxes are more efficient than fiscal supporting mechanisms.

H05: Energy taxes complemented with tax incentives are more efficient that energy taxes

applied without combination with certain fiscal supporting mechanism.

H06: Energy taxes complemented with tax incentives are more efficient than combination of

energy taxes and emission trading schemes.

The main purpose of this research is to empirically examine the effectiveness of different tax

instruments and their causal relationship on implementation of solar energy technologies in

EU countries. One of the major results expected to emerge from this cross-country empirical

analysis is that energy taxes complemented with tax incentives are the best fiscal policy

measure for promoting solar technologies. It is also expected that optimal tax mechanisms

will make solar technologies implementation financially more efficient in comparison with

the usage of non renewable energy sources.

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DESCRIPTION OF THE RESEARCH PAPERS

The doctoral dissertation will consist of three interrelated publishable papers.

1st paper: Efficient energy tax measures for promoting solar technologies

The primary objective of the critical literature review is to provide fundamental understanding

of solar technologies and energy policies that would stimulate their implementation in order to

reduce greenhouse gasses emissions. Solar energy is one of the top renewable energy sources

with least harmful impacts on the atmosphere. The first paper will be based on the

comprehensive critical literature review in order to investigate which tax mechanisms are

used in environmentally developed EU countries. Paper will comprise classification and

description of energy taxes that different EU countries had already applied. It will also give an

overview of the economic impacts that these tax measures have caused. The main purpose of

the paper is to propose a new empirical model of optimal tax mechanism for promoting solar

technologies on macro and micro level. Dependent variables that model will contain are: the

price of renewable technology implementation, energy tax, tax incentive, emission trading

scheme, and independent variable is renewable energy implementation on macro / micro level

per year. If applied in certain EU country, another fiscal instrument will be added in the model

with the purpose of testing its efficiency in supporting the renewable energy implementation

on macro and micro level per year. Impact of these fiscal policy measures on GDP and GHG

emission reductions will also be examined.

Table 1: Variables to be empirically tested in order to construct the econometric model of

optimal fiscal policy measures for implementing solar technologies

DEPENDENT VARIABLE

INDEPENDENT VARIABLE

Variables that will be interchangeably used as

dependent variables in the model:

- Renewable energy implementation on

macro level per year

- Renewable energy implementation in

firms per year

Variables that will be additionally used as

dependent variables:

- GDP

- GHG emission reductions

Variables included in the model:

- TAXES:

- Energy tax (– electricity tax)

- FISCAL SUPPORT

MECHANISMS:

- Tax incentives

- Emission trading schemes

Variables (if applied in certain EU country)

that will be additionally included in the

model and examined:

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- Tax credits

- Governmental grants

- Feed in tariffs

- Renewable energy certificates

- Carbon credits

- COMBINATION OF ENERGY

TAX AND PARTICULAR FISCAL

SUPPORT MECHANISM

Source: Author

2nd

paper: Efficient energy tax policies for stimulating the development of solar technologies

– macro analysis

Second paper will empirically test proposed model on macro level based on data set from EU

countries that applied different energy policies. Main hypothesis indicates that efficient

energy taxes and supports can help governments to accomplish environmental goals regarding

energy use and emissions. Empirical analysis of the effectiveness of various energy

mechanisms that are applied in EU countries will be undertaken in order to find the most

effective systems for promoting solar technologies development. Based on research of

Schmidt, S. N. et. al. (2010) we propose the first model:

where i denotes the country and t denotes time in years.

– The total number of solar technologies implemented in every country in one year

– The total number of solar technologies implemented in one country in one year

– Energy tax

– The price of renewable technology implementation

– Tax incentive

– Emission trading scheme

– Error term

In order to test whether the appropriate energy tax policy raises the price of non renewable

energy we propose the second model (based on research of Schmidt, S. N. et. al. (2010)):

where i denotes the country and t denotes time in years.

– The price of non renewable energy

– The price of non renewable energy in the previous year

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– Energy tax

– Error term

The empirical analysis will be of great importance for countries that are starting with the

application of energy tax measures and for countries which have not yet introduced necessary

measures in order to face the climate change fight. Results obtained will be of great use for

these countries in order to achieve energy savings, money savings and competitiveness.

3rd

paper: Optimal energy tax system for stimulating the implementation of solar

technologies – micro analysis

Third paper will empirically explore the efficiency of energy taxes on micro level. Increase

in energy prices lead to solar energy replacement efforts. The greater number of energy taxes

and incentives indicate the emerging need for finding the optimal combination of these

instruments that will best promote the implementation of renewable technologies in firms.

Therefore, the aim of this paper is to investigate the efficiency of various energy taxes and

supporting policies on implementation of solar technologies in companies. These

technologies use the sun's energy to provide electricity, hot water, heat and even cooling. The

empirical study will be based on micro level data set for companies from EU countries that

applied different fiscal policies. This paper will examine the causal relationship between

various energy taxes/supports and implementation of solar technologies in firms per year

using time series data. It is also very important to examine the impact of ownership structure

on renewable technologies implementation in firms. The empirical model that comprises the

most efficient tax measures for implementing solar technologies in firms will be proposed.

Based on research of Schmidt, S. N. et. al. (2010) we propose the model:

where i denotes the country and t denotes time in years.

– The total number of solar technologies implemented in all observed firms in one year

– The total number of solar technologies implemented in one firm in one year

– Energy tax

– The price of renewable technology implementation

– Tax incentive

– Emission trading scheme

– Ownership structure

– Error term

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The structure of the doctoral theses is proposed as follows:

General introduction

1st paper: Efficient energy tax measures for promoting solar technologies

1. Introduction

2. Theoretical Framework

3. Analyzes of the previous findings

4. The empirical model

5. Data set

6. Results

7. Discussion of Results, limitations and further research

8. Concluding remarks

2nd

paper: Efficient energy tax policies for stimulating the development of solar technologies

– macro analysis

1. Introduction

2. Theoretical Framework

3. Empirical Analysis

4. The empirical model on macro level

5. Data set

6. Results

7. Discussion of Results, limitations and further research

8. Concluding remarks

3rd

paper: Optimal energy tax system for stimulating the implementation of solar

technologies – micro analysis

1. Introduction

2. Theoretical Framework

3. Empirical Analysis

4. The econometric model on macro level

5. Data set

6. Results

7. Discussion of Results, limitations and further research

8. Concluding remarks

General conclusion

References

Appendix

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DISCUSSION AND CONCLUSIONS:

The most important conclusion drawn is that energy taxes are driver of emerging

technologies. Complemented with fiscal policy supporting mechanisms they should be one of

the most efficient ways of spurring the eco friendly technologies application. Heterogeneity

study represents significant differences in efficiency of various types of energy taxes and

fiscal supports. Most of studies deal with the tax system within one country or compare

two/three different fiscal policy regimes. One of the most important current environmental

questions is: How to find the optimal combination between all energy taxes and incentives

applied in EU with the purpose of shortening the period of implementation of renewable

technologies on macro and micro level? In order to answer that questions and contribute to

practice by helping governments to introduce the most efficient combination of fiscal

measures the empirical model is proposed. It is expected from the analysis to confirm that

energy taxes complemented with the certain incentives create the best way to reduce

pollution, whilst being easy to implement. Comprehensive study on energy efficient fiscal

policies for promoting solar technologies will significantly contribute to science in the field of

energy taxation. The proposed empirical model that will comprise the most efficient tax

mechanisms that countries should accept in order to develop and implement renewable

technologies in a cost-effective way will contribute to their greenhouse gasses emission

reductions, money and energy savings and economic growth. In addition, this model will

contribute to the policy-making process by helping governments to adopt the best energy

policies for reaching their emission target goals.

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19. Lu, C., Zhang, X. & He, J. (2010). A CGE analysis to study the impacts of energy

investment on economic growth and carbon dioxide emission: A case of Shaanxi Province

in western China. Energy, 35(11), 4319-4327.

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analytical hierarchy process. Energy, 35 (12), 5230-5240.

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Working papers:

1. Newbery, D. (2005). Why tax Energy? Towards a More Rational Energy Policy. Working

paper No. 72, Cambridge – MIT Institute, Cambridge.

2. Strand, J. (2007). Energy Efficiency and Renewable Energy Supply for the G-7 Countries,

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Appendix 1: Fiscal instruments for promoting renewable energy implementation

Fiscal instrument

Efficiency of the

instrument – key

findings

Research Comments and

suggestions

Landfill tax & the

landfill tax credit

scheme

The Landfill Tax has the

potential to reduce

landfill disposal, to raise

funds for government

use and also to positively

contribute to the

promotion of sustainable

waste management.

Morris, J. R. & Read, A.

D. (2001)

Landfill taxes and tax

credit schemes can have

positive economic and

environmental effects in

countries where the main

method of disposing of

waste is to deposit it in

landfill.

Feed-in tariff (FIT) vs.

Renewable portfolio

standard (RPS)

The evidence from

observed

countries (Denmark,

Germany and UK)

suggests that, given

appropriate design

features, the

FIT is more cost effective

at getting renewable

energy developed.

Ekins, P. (2004)

The optimal model of

energy taxes and fiscal

supports has not emerged

and the scope for further

analysis is to evaluate

different experiences in

order to inform how this

goal may be

accomplished.

Electricity tax vs.

Increased VAT rate

A complete abolishment

of the electricity tax, and

replacing revenue by

increased value added tax

(VAT), would cause a

more equal distribution of

living standard and, at the

same time, avoid the

trade-off between

efficiency and

competitiveness.

Bjertnæs, G. H., Fæhn, T.

& Aasness, J. (2008)

Well thought decisions on

the level of tax rates and

incentives are crucial for

clean technologies

implementation. These

decisions should be result

of the comprehensive

study on fiscal policy

measure impacts on the

country budget and the

social status of the

citizens.

Pro-ecological tax

Pro-ecological tax should

replace the existing value-

added tax (VAT). The

income of the state after

introducing the new tax

should remain without

any change.

Szargut, J. & Stanek, W.

(2008)

Fiscal policy carriers

should be very careful if

applying these existing

findings. After the taxes

are introduced, frequent

changes should not be

done because even a

smallest correction could

cause negative economic

impacts. Before final

decision making process

additional research should

be conducted.

Tax incentives vs.

Energy taxes

Incentives to promote the

use of energy-efficient

Markandya, A., Ortiz, R.

A., Mudgal, S. & Tinetti,

Instead of working only

on comparison of taxes

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appliances can be cost-

effective, but that

depends on the particular

country and the options

under consideration.

B. (2009) vs. subsidies, empirical

study that will examine

the efficiency of these

instruments if applied

together should be

conducted.

Governmental grants

(GG) vs. Feed in tariffs

(FIT) vs. Renewable

energy certificates

(RECs) vs. Carbon

credits (CC)

The green certificate

mechanism is the most

appropriate one for

raising the profitability of

hydroelectric projects.

Conversely, the FIT is the

best mechanism to

increase NPV of

photovoltaic systems and

wind energy projects.

The GG and CC are

secondary support

mechanisms compared to

FiT and RECs.

Falconett, I. & Nagasaka,

K. (2010)

It is important for fiscal

policy carriers to combine

support mechanisms with

energy taxes in order to

create the most efficient

future renewable energy

supporting scheme. Based

on the previous findings it

is clear that all supporting

policies have to achieve a

certain transformation

towards their more

efficient implementation.

Carbon tax

Carbon taxes are one of

the alternative fiscal

policy instruments that

are more likely to orient

social and economic

activity towards harmful

emission reductions.

Andrew, J., Kaidonis, M.

A., & Andrew, B. (2010)

A carbon tax

implementation does not

cause radical social

transformation of the

economy. In addition,

these taxes complemented

with the proper choice of

fiscal supports are the key

solution for emergent

technologies

implementation

improvement.

Source: Author