Tax incentives to promote green electricity: An overview of EU-27 countries

This paper provides a comprehensive overview of the main tax incentives used in the EU-27 member states (MSs) to promote green electricity. Sixteen MSs use tax incentives to promote green electricity simultaneously with other promotion measures, especially quota obligations and price regulation. However, not all available technologies are promoted. For example, six MSs (Germany, Romania, Slovak Republic, Denmark, Sweden and Poland) have included an exemption on the payments of excise duties for electricity when the electricity is generated from renewable energy sources (RES). This tax incentive is the most widely used. Limited tax incentives in personal income tax are available in Belgium, France, Czech Republic and Luxembourg. In corporate tax, tax incentives consist mainly of a deduction in the taxable profit (Belgium, Greece, Czech Republic and Spain). Lower tax rates in VAT are applied in three MSs, France, Italy and Portugal. Only Spain and Italy use effective tax incentives in property tax. As a great diversity of tax incentives has been used to promote green electricity, this adds another difficulty to the EU objective of providing a renewable energy policy framework, but also it offers a useful set of case studies which can be used to inform EU policy development.     

The impact of the European Union emission trading scheme on the electricity-generation sector

In order to comply with their commitments under the Kyoto Protocol, France and Germany participate in the European Union Emission Trading Scheme (EU ETS) which predominantly concerns the electricity-generation sectors. In this paper we ask whether the EU ETS provides the appropriate economic incentives to produce an efficient system in line with the Kyoto commitments. If so, electricity producers in the countries concerned should include the price of carbon in their cost functions. After identifying different sub-periods of the EU ETS during its pilot phase (2005–2007), we model the prices of various electricity contracts in France and Germany and look at the volatility of electricity prices around their fundamentals while evaluating the correlation between electricity prices in the two countries. We find that electricity producers in both countries were constrained to include the carbon price in their cost functions during the first two years of the EU ETS. Over this period, German electricity producers were more constrained than their French counterparts, and the inclusion of the carbon price in the electricity-generation cost function was much more stable in Germany than in France. We also find evidence of fuel switching in electricity generation in Germany after the collapse of the carbon market. Furthermore, the European market for emission allowances has greatly contributed to the partial alignment of the wholesale price of electricity in France to that in Germany.     

Atlas of geothermal resources in Europe

The geothermal resources of most European countries have been estimated and compiled in the recently published Atlas of Geothermal Resources in Europe, a companion volume to the Atlas of Geothermal Resources in the European Community, Austria and Switzerland. Publication of this Atlas comes at a time when the promotion of a sustainable and non-polluting energy is high on the agenda of local energy suppliers, municipal administrations and all European governments. The participating countries are: Albania, Austria, Belarus, Belgium, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Netherlands, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Ukraine and the UK. A volumetric heat content model for porous reservoirs was the basis for calculating the resources, assuming that exploitation of the geothermal resources would take place in a doublet well system. The geothermal reservoirs are defined in a set of 4 maps, by depth, thickness, temperature and resources. The assessment methodology is simple and is based on a small number of parameters so that regions with very limited data coverage can also be evaluated. An example is given in this paper of the eastern North German Basin. The maps presented in the Atlas permit a first order evaluation of the geothermal potential in terms of technical and economic viability. This uniform procedure applied to all countries and regions allows comparisons and serves as a guide for setting priorities and planning geothermal development. This Atlas also helps in the search for appropriate partners for international cooperation in geothermal exploration in Europe.     

PASSIVE COOLING OF BUILDINGS -RESULTS OF THE PASCOOL PROGRAM

This paper aims to investigate and present recent progress on the field of passive cooling of buildings achieved mainly through the PASCOOL research program of the European Commission. The PASCOOL group is composed by several national consortia including Belgium, France, Greece, Italy, Portugal, Spain, Switzerland, The Netherlands, UK, Slovenia, Hungary, Bulgaria and the Joint Research Centre of the European Commission at Ispra. The main scientific achievements of the project and especially the developed techniques, tools and design guidelines to promote passive cooling applications in buildings are presented.     

The causality relationship between energy consumption and GDP in G-11 countries revisited

This paper explores whether energy conservation policies can be implemented in countries with the same level of development. That is, is restraining energy consumption without compromising economic growth feasible in all industrialized countries? A new Granger non-causality testing procedure developed by Toda and Yamamoto [1995, Journal of Econometrics 66, 225–250] is applied to re-investigate the relationship, if any, between energy consumption and income in 11 major industrialized countries. The results clearly do not support the view that energy consumption and income are neutral with respect to each other, except in the case of the United Kingdom, Germany and Sweden where a neutral relationship is found. Bi-directional causality in the United States and uni-directional running from energy consumption to GDP in Canada, Belgium, the Netherlands and Switzerland are found. This indicates that energy conservation may hinder economic growth in the latter five countries. Further, the causality relationship appears to be uni-directional but reversed for France, Italy and Japan which implies that, in these three countries, energy conservation may be viable without being detrimental to economic growth.     

Wood fuel trade in European Union

Wood fuels are the most important alternatives of fossil fuel which is one of the reasons of the climate changes in the world and of global warming. Wood fuels, which have an important role in the cause of both providing energy requirement of production units and heating for household and healing energy deficit, disperse very less CO₂ than fossil fuels to atmosphere. Bio-fuels are used to provide energy requirement among EU countries like using in lots of developed countries. Resources having by lots developed countries and EU countries are not at enough level for bio-fuels. For this reason, trade of bio-fuels has been become in an important situation in recent years. In this study, import and export levels of bio-fuels of EU countries and Turkey, which is a candidate for union, were investigated between 2003 and 2006. The date is obtained from European Forest Institute (EFI) forest products trade flow database. As a result of the study, while rises were determined in years, it is determined that the most important exporters are Germany, Italy, Latvia and Poland and the most important importers are Germany, Italy, Belgium and UK. It is seen that Turkey has a low trade level in selected product groups.     

Contagion,volatility persistence and volatility spill-overs: The case of energy markets during the European financial crisis

The aim of this paper is to investigate if and to what extent events in financially troubled EU markets (Greece, Ireland and Portugal) affected energy prices during the EU financial crisis. More specifically, (i) we test for contagion effects of bond prices on energy/commodity prices, (ii) we examine whether the nature of energy price volatility is affected and (iii) we investigate whether bond volatility from the financially distressed EU markets spills over to energy/commodity return volatility. Our results indicate the existence of significant contagion effects; notable changes in the nature of energy/commodity volatility during the EU financial crisis; and spill-over effects. The results are robust to the use of short-term yields instead of long-term bond price changes, and to the inclusion of Spain and Italy in the sample.     

The impact of oil price shocks: Evidence from the industries of six OECD countries

Most of the studies about the macroeconomic consequences of oil price shocks have been focused on US aggregate data. In contrast to these studies, this paper empirically assesses the dynamic effect of oil price shocks on the output of the main manufacturing industries in six OECD countries. The pattern of responses to an oil price shock by industrial output is diverse across the four European Monetary Union (EMU) countries under consideration (France, Germany, Italy, and Spain), but broadly similar in the UK and the US. Moreover, evidence on cross-industry heterogeneity of oil shock effects within the EMU countries is also reported.     

Performance and viability analysis of small wind turbines in the European Union

Nowadays, wind energy plays a key role as a sustainable source of energy and wind turbines are a relevant source of power for many countries world-wide. In such a context, this paper investigates the technical and economic feasibility of small wind turbines for five of the main European Union countries (France, Germany, Italy, Spain and The Netherlands). Ten commercial turbines with rated power from 2.5 kW to 200 kW are evaluated considering their installation and operative conditions. Several parameters most affecting wind turbine performances are evaluated and the estimation of the annual cash flows during the expected plant life-time are determined as a function of both the installation location (wind speed probability distribution, national incentive scheme and tax level) and the wind turbine characteristics (rated power curve, maintenance, installation and shipping costs). The obtained data are presented and discussed through a parametric analysis based on the Net Present Value capital budget approach, showing the conditions making these systems profitable or non-profitable and explaining the relative motivations. Moreover, the analysis outcomes are further investigated highlighting the dependence of the turbine profitability from the considered parameters, including a comparative analysis among the five analyzed European countries.     

Energy efficiency in the residential sector: identification of promising policy instruments and private initiatives among selected European countries

Improving residential energy efficiency is widely recognised as one of the best strategies for reducing energy demand, combating climate change, and increasing security of energy supply. However, progress has been slow to date due to a number of market and behavioural barriers that have not been adequately addressed by energy efficiency policies and programmes. This study is based on updated findings of the European Futures for Energy Efficiency Project that responds to the EU Horizon 2020 Work Programme 2014–2015 theme ‘Secure, clean and efficient energy’. This article draws on five case studies from selected European countries—Finland, Italy, Hungary, Spain, and the UK—and evaluates recent energy efficiency developments in terms of indicators, private initiatives, and policy measures in the residential sector. Our analysis shows that the UK government has implemented a better range of policies, coupled with initiatives from the private sector, aimed at improving energy efficiency. However, its existing conditions appear to be more problematic than the other countries. On the other hand, the lack of effective and targeted policies in Finland resulted in increased energy consumption, while in Hungary, Spain and Italy some interesting initiatives, especially in terms of financial and fiscal incentives, have been found.     

A game theoretic model of the Northwestern European electricity market—market power and the environment

This paper develops a static computational game theoretic model. Illustrative results for the liberalising European electricity market are given to demonstrate the type of economic and environmental results that can be generated with the model. The model is empirically calibrated to eight Northwestern European countries, namely Belgium, Denmark, Finland, France, Germany, The Netherlands, Norway, and Sweden. Different market structures are compared, depending on the ability of firms to exercise market power, ranging from perfect competition without market power to strategic competition where large firms exercise market power. In addition, a market power reduction policy is studied where the near-monopolies in France and Belgium are demerged into smaller firms. To analyse environmental impacts, a fixed greenhouse gas emission reduction target is introduced under different market structures. The results indicate that the effects of liberalisation depend on the resulting market structure, but that a reduction in market power of large producers may be beneficial for both the consumer (i.e. lower prices) and the environment (i.e. lower greenhouse gas permit price and lower acidifying and smog emissions).     

Demand response experience in Europe: Policies,programmes and implementation

Over the last few years, load growth, increases in intermittent generation, declining technology costs and increasing recognition of the importance of customer behaviour in energy markets have brought about a change in the focus of Demand Response (DR) in Europe. The long standing programmes involving large industries, through interruptible tariffs and time of day pricing, have been increasingly complemented by programmes aimed at commercial and residential customer groups. Developments in DR vary substantially across Europe reflecting national conditions and triggered by different sets of policies, programmes and implementation schemes. This paper examines experiences within European countries as well as at European Union (EU) level, with the aim of understanding which factors have facilitated or impeded advances in DR. It describes initiatives, studies and policies of various European countries, with in-depth case studies of the UK, Italy and Spain. It is concluded that while business programmes, technical and economic potentials vary across Europe, there are common reasons as to why coordinated DR policies have been slow to emerge. This is because of the limited knowledge on DR energy saving capacities; high cost estimates for DR technologies and infrastructures; and policies focused on creating the conditions for liberalising the EU energy markets.     

How important are current energy mix choices on future sustainability? Case study: Belgium and Spain—projections towards 2020–2030

Despite recent consumption decrease due to recession, European electricity sector is struggling to reach ambitious targets for reductions of greenhouse gas emissions. Our objective is to carry out a macro analysis of the energy mix in two European countries: Belgium and Spain. Life Cycle Assessments are carried for 2005 as well as for seven possible referenced scenarios to reach EU and also national legal objectives at the horizon 2020 and 2030. Ambitious renewable energy sources’ deployment plans can decrease impacts on the environment significantly as those sources replace polluting traditional sources, such as coal/lignite, oil or gas. When concentrating on projections for the future in Spain, results show that a mix with little coal and oil replaced by up to 54% of RES-E energy sources could bring environmental benefits with CO₂ emissions equivalent around 0.2 kg per kWh produced (compared with 0.54 kg in 2005). In Belgium, all future scenarios presented include more coal and gas with a limited share of RES-E; those mixes present more environmental harmful impacts (up to 0.56 kg CO₂ equivalent). This is why RES-E deployment is crucial as long as it is part of an electricity mix with reduced quantities of traditional fossil fuels.     

The benefit of regional diversification of cogeneration investments in Europe: A mean-variance portfolio analysis

The EU Directive 2004/8/EC, concerning the promotion of cogeneration, established principles on how EU member states can support combined heat and power generation (CHP). Up to now, the implementation of these principles into national law has not been uniform, and has led to the adoption of different promotion schemes for CHP across the EU member states. In this paper, we first give an overview of the promotion schemes for CHP in various European countries. In a next step, we take two standard CHP technologies, combined-cycle gas turbines (CCGT-CHP) and engine-CHP, and apply exemplarily four selected support mechanisms used in the four largest European energy markets: feed-in tariffs in Germany; energy efficiency certificates in Italy; benefits through tax reduction in the UK; and purchase obligations for power from CHP generation in France. For contracting companies, it could be of interest to diversify their investment in new CHP facilities regionally over several countries in order to reduce country and regulatory risk. By applying the Mean-Variance Portfolio (MVP) theory, we derive characteristic return-risk profiles of the selected CHP technologies in different countries. The results show that the returns on CHP investments differ significantly depending on the country, the support scheme, and the selected technology studied. While a regional diversification of investments in CCGT-CHP does not contribute to reducing portfolio risks, a diversification of investments in engine-CHP can decrease the risk exposure.     

Reaping the carbon rent: Abatement and overallocation profits in the European cement industry,insights from an LMDI decomposition analysis

We analyse variations of carbon emissions in the European cement industry from 1990 to 2012, at the European level (EU 27), and at the national level for six major producers (Germany, France, Spain, the United Kingdom, Italy and Poland). We apply a Log-Mean Divisia Index (LMDI) method, cross-referencing data from three databases: the Getting the Numbers Right (GNR) database developed by the Cement Sustainability Initiative, the European Union Transaction Log (EUTL), and the Eurostat International Trade database.Our decomposition method allows seven channels of emission change to be distinguished: activity, clinker trade, clinker share, alternative fuels, thermal and electrical energy efficiency, and electricity decarbonisation. We find that, apart from a slow trend of emission reductions coming from technological improvements (first from a decrease in the clinker share, then from an increase in alternative fuels), most of the emission change can be attributed to the activity effect.Using counterfactual scenarios, we estimate that the introduction of the EU ETS brought small but positive technological abatement (2.2% ± 1.3% between 2005 and 2012). Moreover, we find that the European cement industry has gained 3.5 billion Euros of “overallocation profits”, mostly due to the slowdown of production.     

Comparative analysis of different supporting measures for the production of electrical energy by solar PV and Wind systems: Four representative European cases

In the 9th of March 2007, the European Council decided a fixing goal of 20% contribution of the renewable energy sources (RES) on the total European electric energy production in 2020.In order to reach such an ambitious goal, all the European countries are adopting different support policies for encouraging the installations of RES-based generation systems.In this paper, after a brief review on the main support policies for RES in Europe, the specific situations of four representative countries (France, Germany, Italy and Spain) are examined, with the purpose of putting into evidence the main differences in the support policies adopted for Photovoltaic (PV) and Wind systems.In particular, a comparison based on the calculation of the pay-back-period (PBP), the net present value (NPV) and the internal rate of return (IRR), for different sized PV and Wind systems, shows that in some situations a support policy can be not convenient for the owner of the RES-based generation system and that, in many cases, the differences between the way of implementation of the same support policy in different countries, can give place to significantly different results.     

Asymmetric volatility in European day-ahead power markets: A comparative microeconomic analysis

This paper uses high-frequency spot price data from fourteen wholesale electricity markets in Europe to analyze asymmetric volatility in European day-ahead power markets with Exponential GARCH (E-GARCH) and TARCH models. Our data set ranges from 1992 to 2015 and consists of approximately 926,000 observations. As such, this paper constitutes the most extensive and comprehensive work conducted so far on European power markets, to the best of our knowledge. Unlike most of the literature that treats price as a continuous variable and attempts to model its trajectory, this paper adopts a unique approach and regards each hour in a day a separate market. The results show, in post-2008 period, the most expensive electricity is consumed in Turkey, Ireland, and UK while the cheapest power is in Russia, Nordic countries, and Czech Republic. Russia, Poland, and Czech Republic have the least volatile markets while France, Ireland, and Portugal have the most volatile ones. Volatility has decreased in many European countries in post-2008 period. Besides, we find magnitude effect is usually larger than the leverage effect, meaning that the absolute value of price change is relatively more important than the sign of the change (whether it is an increase or a decrease) to explain volatility in European day-ahead power markets. Moreover, the results imply there is not a uniform inverse leverage effect in electricity prices; that is, price increases are more destabilizing in some European markets (e.g. Poland, Slovenia, Ireland, Netherlands) than comparable price decreases but vice versa also holds true in some other countries (e.g. Portugal and France). Leverage (or inverse leverage) effect in post-2008 period is relatively stronger in Portugal, France, and Ireland, but its impact is quite limited in Turkey and Germany. Furthermore, although the impact of seasonality on prices is obvious, a specific pattern cannot be identified. Finally, large changes in the volatility will affect future volatilities for a relatively longer period of time in Nordic countries, Ireland, and the UK while changes in current volatility will have less effect on future volatilities in Czech Republic, Russia, and Turkey.     

Cost pass-through of the EU emissions allowances: Examining the European petroleum markets

This paper explores the ability of European refineries to pass-through costs associated with the introduction of the EU Emissions Trading Scheme (EU ETS). A sequence of vector error correction models (VECM) has been estimated within a multinational setting which covers 14 EU Member States. Using weekly data at the country level, this paper finds an influence of prices for European Union Allowances (EUAs) on unleaded petrol retail prices during the trial phase of the EU ETS from 2005 to 2007. The country-specific long-run elasticities of petrol prices with respect to the EUA prices are between 0.01 and 0.09. Given that these elasticities are of the same order of magnitude as the share of carbon allowances costs in total production costs in the refining industry, the estimates are consistent with the full pass-through potential. The variance decomposition analysis shows furthermore that a significant fraction of petrol price changes in Austria, Germany, France and Spain can be explained by changes in allowances prices (between 10% and 20%).     

The implementation of the EU renewable directive in Spain. Strategies and challenges

Based on the European project RES2020, the analysis evaluates the energy strategies to be implemented in Spain in order to satisfy the EU Renewable Directive. The modelling framework relies on the technico-economic model TIMES-Spain, part of the Pan-European TIMES model used in the project. TIMES is a bottom-up technology rich optimisation model representing the whole energy systems of the countries. Among the results, it appears that the gap regarding the renewable deployment in Spain between the Business-as-Usual case (including the existing policies) and the EU Directive should be compensated mainly by the penetration of bioenergy in transport and industry, and by the implementation of conservation measures, which contribute to reduce the total energy demand and thus makes useless additional investments in renewable power plants compared to the Business-as-Usual case. Only higher climate mitigation ambitions result in an absolute increase in the renewable-based electricity generation compared to the Business-as-Usual case. Moreover, when allowed, Spain is offering renewable energy credits under the statistical transfer mechanism to other European countries. The cost increase of the modelled renewable and climate policies compared to the Business-as-Usual remains relatively minor.     

Have European gas prices converged?

The development of a single European market for gas has been a goal of EU policy makers since the Single European Act (SEA) of 1986. EU Directives of 1996 and 1998 put these aspirations into action. However, casual empiricism suggests that convergence may have begun before this. This paper investigates whether gas prices in Europe have converged since 1978. Using annual data, three empirical tests for convergence are applied to gas prices for six EU Member States; a simple test for β-convergence; a cointegration test; and Nahar and Inder's [2002. Testing convergence in economic growth for OECD countries. Applied Economics 34, 2011–2022] test. The results from two of these three tests suggest that convergence did occur for most of the countries in the sample over this period.