The role of fiscal measures in promoting renewable electricity in Spain

The sustainability of the environment implies a dire need to redesign electricity systems. The aim of this paper is to evaluate the role of alternative fiscal incentives to promote renewable electricity. To this end, a disaggregated, electricity-related Computable General Equilibrium model is developed, taking the current structure of the (renewable and non-renewable) electricity sector into account. The Computable General Equilibrium model developed presents at least two advantages: the changes are analyzed from a global perspective (including impacts on prices), and second, rebound effects are accounted for. The fiscal measures examine three scenarios of change in line with the decarbonization processes of economies. Specifically, the scenarios assess: (1) a 100% decrease in renewable electricity taxes; (2) a 23% increase in taxes paid by the non-renewable electricity sector; and, (3) both together. In addition, these fiscal measures are evaluated assuming improvements in electricity selfgeneration. The case study is the Spanish economy for 2016. The Computable General Equilibrium model is calibrated on a symmetric input-output table, constructed from supply and use tables. These tables disaggregate the energy and electricity sectors. Results reveal the role and strength of fiscal policy in boosting the production of electricity generation technologies using green energy resources, and reducing the production of electricity generated from brown sources. However, results suggest that these effects are limited to the energy chain sectors, with insignificant effects in the whole economy. This study also provides better information and guidance to politicians and decision-makers who wish to promote renewables, and the need to have a clear understanding of the influence price competitiveness has on the economy. Moreover, the results of this study have implications for rebound effects when electricity self-generation is implemented.

Automated summary

This study evaluates the role of alternative fiscal incentives in promoting renewable electricity and analyzes the impact of tax changes on the economy using a Computable General Equilibrium model. The findings suggest that fiscal policies can boost the production of green energy technologies but have limited effects on the overall economy. The study provides valuable information for policymakers and highlights the importance of understanding the influence of price competitiveness on the economy when promoting renewables.