Reform, Innovation and Renewable Energy
Critical Issues in Environmental Taxation series
Edited by Natalie P. Stoianoff, Larry Kreiser, Bill Butcher, Janet E. Milne and Hope Ashiabor
Chapter 10: Renewable electricity support in the EU – what lessons can be learned?
Renewable energy technologies play a decisive role for climate change mitigation and environmental protection but also in the context of energy security and cost competitiveness (e.g., Europe 2020 strategy). So far, renewable energy technologies are generally not cost competitive compared to fossil energy technologies. Therefore, the EU and its member states have introduced policy targets and support schemes for achieving a certain share of renewables in total electricity supply. The support instruments are either price based or quantity based. According to economic theory, the two types of instruments deliver the same result; they are both environmentally effective and economically efficient. However, in the real world, the different instruments may result in different outcomes: price-based instruments provide (higher) certainty regarding the price level, while quantity-based instruments provide (higher) certainty regarding the effective diffusion of renewable energy technologies. Renewable electricity support schemes differ between the European countries. Feed-in tariffs and feed-in premiums are the most relevant support schemes in the European Union; often they are complemented by other instruments such as investment grants, tax exemptions or fiscal incentives. Quota obligations are implemented in five EU member states. Frequently, this instrument is also combined with feed-in tariffs for specific technologies and/or plant sizes. In addition to the instruments chosen, the support level for renewable energies also differs significantly between EU member states. Furthermore, the support schemes have been frequently adapted by member states not only with respect to the support level but also with respect to the predominant policy instrument. This chapter presents an overview of the development renewable electricity support schemes in EU member states. Based on empirical data as well as on the available literature, the schemes are assessed in terms of their environmental effectiveness and economic efficiency and policy recommendations aredeveloped.
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