This paper provides an overview of energyand (implicit) CO 2 taxation in theEU member countries.
Against the background of theEUenergy taxation directives, energyand implicit CO 2 tax rates in theEU
countries are discussed, focussing on taxation in thetransportsector as a major non-ETS emitter. Empiri- cal evidenceonthe impact of energyandcarbontaxesonenergy use and emissions is presented andthe economic and distributional effects of energyandcarbontaxes are then discussed. Research onenergy price elasticities suggests that energyandcarbon taxation can make a significant contribution towards achieving emission reductions, particularly in thetransportsector where greenhouse gas emis- sions continue to be onthe rise in theEU. Evidenceonthe economic impacts of energyandcarbontaxes furthermore shows that a double divided can be achieved. With respect to the distributional im- pacts of carbonandenergytaxesevidence is, however, mixed. While empirical studies generally ne- gate regressive effects for taxesontransport fuels, energyandcarbontaxeson heating fuels tend to be found regressive.
5. Summary, Conclusion and Policy Recommendation
In this study, we evaluated the impact of renewable energy development oncarbon emission reduction. We also investigated the effectiveness of innovation in energy technologies for reducing carbon emissions, ICT technologies, and environmental taxes applied to encourage renewable energy development. Environmental tax was considered in the model, in order to evaluate the effects of market regulation. Several scholars have applied different methodologies to examine the relationship between energy consumption and economic growth in individual and groups of countries with respect to governmental energy policies. The relationship between carbon emissions and economic growth has been studied by many researchers using the Environmental Kuznets Curve. These studies analyzed variables, such as population, inequality, trade, and openness. Most results showed that environmental quality would be promoted after a certain level of economic growth is achieved. Therefore, developed countries with a high level of GDP per capita would promote environmental quality.
While the effects of these reforms onenergy consumer prices may be uncertain in some cases (oil sector) or modest in others (gasoline price subsidies), energy subsidy cuts and an ambitious climate policy are likely to increase energy prices in a country with a fossil‐fuel re‐ liant energy system. Higher energy prices are thus likely to lead in the short‐run to welfare losses that may not be equally distributed. In developed countries, poorer households tend to be more vulnerable to energy price increases, as energy goods usually represent a larger proportion of their total expenditure, with some exceptions for transport fuels (Flues and Thomas 2015; Speck 1999). For developing countries, although there is less evidenceonthe distributional effects, Shah and Whalley (1991) as well as Shah and Larsen (1992) pointed out early on that the emerging distributional patterns are apparently different. Recent results in Sterner (2011) and Arze del Granado et al. (2012) show that high‐income households capture significantly higher amounts of subsidies for fuels than low‐income households. A similar result is found by Datta (2010), who investigates the distributional welfare effects of a fuel tax in India. Gillingham et al. (2006) show that the direct (consumption losses via higher prices) and indirect (income effects) welfare impacts of fuel price increases (both domestic andtransport fuels) are either regressive or distributionally neutral in relative terms for a range of developing countries.
Interviewees from the UT sectors see national and European governments and regulators as the most powerful external pressure groups in terms of corporate sustainability. This is not because they are most demanding but because they are in the strongest position to change or revoke companies’ current licenses to operate through higher chiefly environmental standards. In the past domestic emission standards andtheEU large combustion plant directive effectively reduced air pollution (Economist Intelligence Unit, 2003a). Nowadays mostly utilities with a CO 2 -intensive fuel mix for their power plants are strongly driven by the European CO 2 emission trading system which will become mandatory after 2008. TheEU has also set an indicative target for electricity sourced from renewable energies of 12.5% by 2012. In contrast, governments in industrialized countries constitute a less powerful pressure group in the OG sector because, as elaborated in the quote below and section 8.1 Issues in more detail, they cannot easily regulate those activities that are associated withthe sector’s major issues. This is because the activities take place in developing countries (social impact of upstream activities) and in the use phase of the product (local air pollution and, above all, climate change through use of fossil fuels). Interviewees also reported that governments in developed countries are clearly more concerned with social and environmental performance than developing countries are. The latter are primarily concerned with oil and gas revenues, even if they become increasingly aware of environmental and social issues over time. In developed countries regulatory pressure on OG companies is limited to raising standards of fuel quality, i.e. the reduction of lead and sulfur content to combat local air pollution. In Europe, individual member states have introduced eco-taxeson fuels. Furthermore, refineries will be subject to the forthcoming EU emission trading system (Anonymous, 2004d), but the corresponding pressure is substantially lower than in the UT sector due to the lower carbon intensity (see section 22.214.171.124 Environmental issues).
Ever since researchers have provided evidence for a causal link between man-made emissions of green house gases and global warming, there is a consensus that urgent actions are required to drastically reduce emission levels and avoid the dramatic consequences of global warming. How- ever, no consensus has been reached regarding the key question on how to efficiently reduce the climate-damaging emissions. In fact, a broad spectrum of climate policy instruments are con- currently in use ranging from emission trading schemes, subsidies for renewable energy sources, emission target agreements to taxeson gasoline as well as taxesoncarbon dioxide emissions. The main goal of these policies is to provide incentives for consumers and firms alike to switch to cleaner energy sources and/or to reduce their emissions of GHG into the atmosphere. In light of this broad variety of potential policy interventions, empiricalevidenceonthe impact of various policies onenergy consumption and emissions of firms and households is rather scarce, in particular with respect to the effects of a carbon tax on firm or plant outcomes.
Second, our paper relates to the literature on directed technical change, in particular Acemoglu (1998, 2002; 2008) which itself was inspired by early contributions by Hicks (1932) and Habakkuk (1962). 4 An application of this idea is theempirical literature link- ing environmental policy and directed technical change (surveyed in Popp, Newell and Jaffe, 2009). In particular, Popp (2002) uses aggregate U.S. patent data from 1970 to 1994 to study the effect of energy prices onenergy-efficient innovations. He finds a signif- icant impact from both energy prices and past knowledge stocks on directed innovation. However, since Popp uses aggregate data a concern is that his regressions also capture macro-economic shocks correlated with both innovation andtheenergy price. Our work uses international firm-level panel data which allows us to exploit differences in the extent to which firms in different countries are affected by policy-induced shocks to theenergy price (e.g. from fuel taxes). We control for global macro shocks with a full set of time dummies. Further evidence of directed technical change in the context of energy-saving can be found in Newell, Jaffe and Stavins (1999) which focuses onthe air-conditioning industry, or in Crabb and Johnson (2010) who also look at energy-efficient automotive technology. However, neither of these papers use multi-country data nor analyze whether there is path dependency in the direction of technical change. Hassler, Krussell and Olovs- son (2011) find evidence for a trend increase in energy saving technologies following oil price shocks. They measure theenergy-saving bias of technology as essentially a residual which is attractive as it side-steps the need to classify patents into distinct classes. The advantage of our technology variables is that they are more directly related to the inno- vation we want to measure. Finally, Acemoglu, Akcigit, Hanley and Kerr (2012) calibrate a microeconomic model of directed technical change to derive quantitative estimates of the optimal climate change policy.
In 2021, Germany will launch a national emissions trading system (ETS) in its road transportand housing sectors. This climate policy instrument aims at raising theenergy cost burden of those households and firms that consume fossil fuels, the major source of carbon dioxide (CO2) emissions. A promising approach to secure public acceptance for such a carbon pricing would be to entirely reallocate the resulting “carbon” revenues to consumers. This article discusses three alternatives: a) a per-capita reallocation to private households, b) the reduction of electricity prices by, e.g., decreasing the electricity tax, as well as c) targeted financial aid for vulnerable consumers, such as increasing housing benefits. To estimate both the revenues originating from carbon pricing andthe resulting emission savings, we use price elasticities on individual energy consumption in the road transportand housing sector from theempirical literature. Most effective with respect to alleviating the burden of poor households would be increasing housing benefits. While this measure would not require large monetary resources, we argue that the remaining revenues should be preferably employed to reduce Germany’s electricity tax, given the steadily increasing amount of electricity generated by renewable energy technologies.
5 What is the impact of taxes, levies and fees onthe
profitability of sector coupling technologies?
In theEU, the development of RES has been stronger in the power sector than in heating & cooling and in thetransportsector. Provided that financing of addi- tional costs arising from RES-support is predominantly financed via levies on top of the electricity price, the burden on electricity (weighted EU-average) has been increasing between 2008 and 2015 (see Figure 2, upper figure), leading to higher burden for electricity compared to gas. This leads to high fuel prices for heat pumps, whilst a gas boiler profits from gas prices with lower regulatory price com- ponents. We observe an increasing relevance of regulatory and non-market based price components in particular in case of electricity (see Figure 2, upper figure). Whilst the higher burden for electricity has not been a problem for com- petition in two separate and mainly independent markets, differences in charges can lead to distortions of competition, if electricity competes as a fuel with gas. Another effect of the increased relevance of regulatory price components is that price signals from the market do not reach the final consumers in an undistorted manner and may set wrong incentives. Thus, industrial load management may lead to higher grid fees if the maximum load increases due to the implemented measures (see Agora Energiewende, 2017). Self-produced electricity which is often (partially) exempted from charges or fees may not cease production in times of excess electricity supply or electricity prices amounting to zero (see Agora En- ergiewende, 2017).
Also Hummels, Lugovskyy, and Skiba (2007) theoretically and empirically look at this topic. They investigate the market power in thetransportsectorand show that thetransport price is not just a cost proportional to the value traded. Hummels, Lugovskyy, and Skiba (2007) found that ocean cargo transport firms charge higher prices when transporting products with higher product prices, lower import demand elasticities, higher tariffs and when facing fewer competitors on a trade route. They also mention that thetransportsector formed a cartel andthetransport carriers met at so-called liner conferences to discuss shipping prices and market shares. Since October 2008 carriers serving theEU are no longer allowed to participate in liner conferences. TheEU commissions released their own guidelines, first in 2008 and then some clearer guidelines in 2011 which are similar to the competition laws in other sectors of the economy. This shows that in the real world there exists a transportsectorwith endogenous transport costs and therefore transport costs should also be endogenously modelled in trade theory.
LIBEMOD determines all prices and quantities in the European energy industry as well as prices and quantities of energy goods traded globally. In addition, the model determines CO 2 emissions by country and
sectors (households; services and public sector; manufacturing; transport; and electricity generation). In Section 2 we provide a description of LIBEMOD, focusing mainly on supply of electricity. This section builds on an earlier version of the model; see Aune et al. (2008). In the new version of the model, more countries have been added (mainly Eastern European countries); the end-user sectors have been refined (the services and public sector has been separated from the household segment); the modeling of wind power has been changed and more renewable technologies have been included (run-of-river hydro and solar power); the modeling of natural gas has been refined (LNG has been included); bioenergy has been split into biomass and biofuel; all data have been updated (the data year has been changed from 2000 to 2009); andthe complete model has been recalibrated (see LIBEMOD 2015). In particular, to the best of our knowledge, LIBEMOD is the first energy market model with truly endogenous investment in renewable electricity.
8% and cumulated power sector emissions by 18%, thereby shifting more of the decarbonization burden to the industry sector. At the same time, electricity prices and total system costs are only marginally affected even if BECCS is unavailable – they increase by less than 1%. This illustrates that the negative emissions from BECCS can facilitate achieving deep decarbonization targets, but they are not a sine qua non for power sector decarbonization. Refraining from using fossil-based CCS has no discernible effect oncarbon emissions and prices. It thus seems sensible to focus CCS-related research and demonstration projects on BECCS and CCS for industry process emissions instead of CCS for fossil power plants. While this study provides new insights on ETS-driven power sector decarbonization pathways for theEU, further research is needed to test the robustness of these findings and to better represent the deep interconnectedness of future decarbonized energy systems. One important step would be to increase the detail of the representation of industry and heating plant abatement costs and options. Furthermore, sector-coupling effects on electricity demand and short-term flexibility options as well as the competition for scarce resources like biomass or CO 2 storage
Reactions to arising issues
While a flexible policy design is desirable and adjustments to existing policies are required, the means are arguable. In particular, instruments that are currently applied in Germany promote conflicting policy objectives, since there have been calls for subsidies for maintaining back-up capacities. Hence, the phase-in promotion of RE would be combined withthe promotion of undesired technologies that policy makers sought to phase-out. Quintessentially, all energy producers would receive subsidies, the state would be the old and new central player, andthe market selection process would be undermined. This is not desirable in an industry in which many decentralised players compete, and central planning is neither feasible nor desired. Policy makers need to guarantee the security of supply, which resulted in a discussion about the grid, and spare capacities or maintaining a strategic reserve. The strategic reserve does not partake in the wholesale market. It is triggered by a shortage and a price increase, which induces a volume of approximately € 12bn. This is then paid to the entity of all plants, and not only to the providers of emergency capacities who would otherwise exit the market due to their lacking profitability. Approximately 40% of the volume, € 4.8bn, is paid to nuclear facilities (12,000 MW) and brown coal plants (18,000 MW).
The first carbontaxes were implemented in the early 1990s in the Scandinavian countries and Netherlands (Table 2). The objective of these taxes levied on petroleum products, natural gas and – in some cases – coal, were to reduce or at least stabilize energy consumption and CO 2
emissions. Carbontaxes in Finland, Netherlands, Norway and Sweden are general government revenues and are not rather earmarked for environmental purposes. However, in all four countries carbontaxes were part of a broader environmental tax reforms designed to the overall shift tax burden from labor to environmental degradation (see Hoerner and Bosquet, 2001: 11-26). Thecarbonand other environmental tax revenues have been used to reduce income taxesand social security contributions.
port for Pigouvian pricing. Politicians are well-advised to not use all environmental tax proceeds for green spending purposes, as it could leave those disengaged about the environment outside of the conversation. A lump-sum payment appears to have broadest appeal because it seems to address a wide variety of fairness motives and own economic interests. 1 Rich countries that enacted a major carbon price reform in the past used the revenue for several modes of spending at the same time (see Klenert et al., 2018a). Our study underlines that such revenue use to make carbon pricing work for all citizens is an essential feature, rather than a political bug of political successful environmental taxation, which is not the case for naïve double dividend proposals that entail the reduction of other taxes for instance. What is more, with increasingly ambitious climate policies in the future both the distributional impacts as well as the revenues are bound to grow. Sooner or later the question of recycling will thus become conﬂated with questions of broader societal redistribution. If anything, this will make the issue of fairness only more relevant.
elements of the environment are reflected in the organization and these characteristics show persistence after the sensitive time period (Marquis & Tilcsik, 2013). In the observed cases, organizational structures such as the size of the organization andthe degree of existing ecosystems and capabilities as shown withthe firm’s endowment with operand or operant resources showed to have an impact onthe pathways of the value co-creation activities. Therefore, it can be said that the co-creation activities were designed to fit the initial institutional environment andthe synchronization is a mechanism to ensure this throughout the maturization of the value co-creation. The relative stability of the pathway later can be then explained by institutionalism (Marquis & Huang, 2010; Kimberly, 1975). Onthe other hand, recent literature finds, that the constraints of initial resource and technology environment shape initial practices and capabilities as shown for example in a study of Kriauciunas and Kale (2006). In our sample, firms that showed a background in technology development or were familiar with several technology-based value creation activities, focused to take these initial resources to leverage them for resource integration through a higher degree of resources interaction. Contrary, firms with low technology resources focused on high interaction of organizations and maintained this over time. However, contrary to the findings of Kriauciunas and Kale (2006), in the case of value co-creation initial resource and technology constraints need to be evaluated based onthe included overall ecosystem and synchronized alongside the actors. Therefore, the path dependency or imprint has an impact onthe overall ecosystem and seems to get stronger in its effect. Moreover, the counterintuitive finding that pathway 1c is impassable to the studied firms
The survey included eight questions that account for several dimensions of energy-related financial literacy. Five of these eight questions tried to assess the level of knowledge related to electricity price, the electricity consumption of some appliances, andthe concept of risk diversification. The remaining three questions were structured to collect information onthe level of cogni- tive skills of the households in performing an invest- ment analysis and computing the lifetime cost of an appliance. In particular, two out of these three questions ask respondents to make calculations considering the inflation rate andthe concept of compound interest rate, while the third question targets computation of the life- time cost of an appliance. We provide a description of the questions used to compute the literacy variables in the “Appendix” section. Based onthe number of correct answers to the different questions, we compute three indices of energy-related financial literacy. 13 We con- struct a general index of energy-related financial literacy (lit_index) based on all eight questions available, which takes values from 0 to 8. We also split the general index into two sub-indices and compute one index varying from 0 to 5 that should reflect the level of energy-related knowledge (lit_knowledge) and a second index varying from 0 to 3 that should represent the level of cognitive abilities of the households in doing an investment cal- culation (lit_cogn_abil). We think that this distinction is interesting because it allows us to separate the role of knowledge from the role of cognitive ability with re- spect to the level of efficiency.
representation (i.e. that are partners in collective bargaining) and trade interests (i.e. chamber of trade and commerce, etc.). 3
The most radical restructuring process took place in the Post-socialist economies during the 1990s following the collapse of state-socialist ‘regime’. Aftermath the privatisation, in relation to the deconstruction-decentralisation of the former mono-system of employers’ organisations, a proliferation of employers’ organisations have taken place. 4 As a result of this process, we may register three employers’ organisations in Poland and six or more in Hungary. Among various problems related to the role of business and employers’ associations in the New Member States, we would like to stress the underdevelopment of sector level bargaining: ‘This is due to the fact that in most of these countries sectoral employers’ organisations are either weak and lack the necessary resources to participate or that they are denied the authority to conclude sectoral agreements on behalf of their members, as is often the case for instance in Hungary and in Poland.’ 5 However, in Hungary, to overcome the lack of sector level social dialogue, an EU-funded (PHARE, 2001-2004) project was launched aimed to create autonomous sector (branch) level institution of social dialogue. This new institution within the Hungarian LRS would have a role to support sector level consultations among the social actors, increasing the number of sector level collective agreements. 6
2007; Yesil & Dereli, 2013 ). Therefore, knowledge (such as skills and expertise), when used in daily business practices of an organization, plays the role of competitive advantage ( Afsheen et al., 2015 ; Hu, Horng, & Sun, 2009 ; Yesil & Dereli, 2013 ). It requires the ﬁrms not only to share the knowledge but to also integrate it into daily organizational processes at large ( Llopis & Foss, 2016 ). Organizations are now knowledge-integrating institutions that combine different groups and people to col- lect as well as donate their knowledge to produce goods and services ( Ibragimova, Ryan, Windsor, & Prybutok, 2012 ). More- over, while obtaining and donating knowledge, knowledge sharing is found as a signiﬁcant method to further generate the knowledge ( Xinyan & Xin, 2006 ). Therefore, for burgeon- ing knowledge management initiatives in the organization, knowledge sharing is very crucial ( Wang & Noe, 2010 ). It can be said that knowledge sharing is a mechanism by which knowl- edge can be transmitted between individuals. Consequently, through such knowledge transmission, individuals acquire new edge to facilitate new actions. Thus, it can be infer that knowledge sharing contributes value to existing knowledge within the organizations. In the knowledge management liter- ature, knowledge management is deﬁned as “those strategies that comprise of such activities of creating, codifying and shar- ing knowledge for obtaining the right information for right person in the right place at right time”( Jean-Paul & Shih, 2011 , p. 3). This deﬁnition highlights the importance of knowledge management in day-to-day organizational maters. Addition- ally, importance of knowledge sharing is also well accredited in psychology literature related to work ( Wang & Noe, 2010 ). Knowledge sharing is referred as “provision of task informa- tion andthe know-how to help others and to collaborate with others to solve problems, develop new ideas or
1994; Bovenberg, 1999). Different revenue recycling regimes can also have major implications for first-best instrument choice (Pezzey and Jotzo, 2012).
We show that an additional tax levied in one country will increase the country’s cost of producing the public good, decrease the others country’s cost, and increase overall costs. This is because of differences in marginal abatement costs. The allowance price in the joint cap-and-trade scheme will decrease as result of the tax relative to a situation without the extra tax. The relative size of countries andthe magnitude and correlation of uncertainty are important determinants for the actual effect of the tax onthe allowance price and total costs. Additional abatement generated by the tax will only occur in cases when all abatement is generated by the tax and exceeds the joint quantity target of public good production of both countries. This represents a corner solution in which the cap-and-trade allowance price equals zero. Expected costs can be far higher in this situation than in the case of pure cap-and-trade without the tax.
x and several more.
These legal acts are to turn the political stagnation due to the greenhouse gas emission into action. Thus, in Article 7 of Directive (EU) 2018/855, European Union points out:
“The 2015 Paris Agreement on climate change following the 21st Co nference of the Par- ties to the United Nations Framework Convention on Climate Change (COP 21) boosts the Union’s efforts to decarbonize its building stock. Taking into account that almost 50% of Union’s final energy consumption is used for heating and cooling, of which 80% is used in buildings, the achievement of the Union’s energyand climate goals is linked to the Union’s efforts to renovate its building stock by giving priority to energy efficiency, making use of the ‘energy efficiency first’ principle as well as considering deployment of renewables.”