The Eighth Annual Global Conference on Environmental Taxation
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Workshop 1: Price and tax incentives: theory and practice

Corporate Income Tax Incentives for Renewable Energy Generation:
Has the Double Dividend Gone Astray?

Carol Ní Ghiollarnáth, Maastricht University, Netherlands

The Kyoto Protocol calls for the development of renewable energy technologies and traditional fiscal policy is a policy tool utilised by the ratifying countries to this end. The  majority of academic discourse addressing fiscal policy, however, concentrates on the implementation of energy taxes to the neglect of direct tax measures and this is not due to the inexistence of direct tax policy. Rather than, or at least in addition to, disincentive tax measures such as energy taxes, the possibility is also available of introducing incentive tax measures in the form of direct tax subsidies. The generation of renewable energy, being a commercial activity, is subject to corporate income tax, and therefore also subject to tax incentives in this form. This paper uncovers the direct corporate income tax incentives for the development of renewable energy in four case studies in the EU – The Netherlands, Belgium, Ireland and the UK.

There is no coherence at the European level on the precise mix of policy tools to be used in pursuit of Kyoto Protocol objectives. Even if a common framework existed at the European level, once the common framework would address direct fiscal incentives, this would be too grand an attack on national sovereignty to find any conclusion. Thus, where direct tax policy reform is at issue, even within the EU context, it is national measures which are at issue. However, national tax incentives are indeed subject  to European Commission approval where they fall within the EU state aid rules.  Thus, this paper also addresses the implications of the EU state aid rules.

Finally, this paper examines the national expenditure related to corporate income tax incentives for the development of renewable energy in the case study countries against revenue raised from energy taxes. Conclusions are to be drawn from this examination which raise the question whether it is mainly the revenue raising potential of energy taxes rather than their environmental effects which has resulted in the disproportionate academic and political concentration on disincentive tax policy as opposed to tax incentives. Has the ‘double-dividend’ gone astray?

This paper concludes with a discussion of the potential road ahead in relation to corporate income tax incentives for the development of renewable energy in the EU, with consideration for the restrictions imposed by EU state aid rules and the current (non)utilisation of the double-dividend from energy taxes for direct tax incentives for the development of renewable energy.


Using Price Incentives to Stimulate Development of
Green Technologies in Electricity Generation

Prof. Nancy Oleweiler, Simon Fraser University, Vancouver, Canada

How effective are price incentives in stimulating the development of green technologies?  Examination of the impact of energy policy in British Columbia sheds light on this question.  In 2003, British Columbia set a target that 50% of all incremental electricity generating capacity should be “clean and green” and come from the private sector.  These “independent power producers” or IPPs sell their electricity to the provincial regulated utility, BC Hydro.  BC Hydro offers IPPs long-term contracts where prices are guaranteed over the life of the contract  and based on full social cost accounting.  I track impact of the policy on the number and type of IPPs developed, generation capacity, innovation, and regional economic impacts.  Experiences in British Columbia identify barriers to the development of green technology and methods of addressing these barriers.


The Answer is Blowing in the Wind: Targeting Tax Incentives for Wind Power

Prof. Michael B. Lang, Chapman University School of Law, USA

The public continues to express strong support for the use of alternative renewable energy sources such as solar and wind power.   Congress and state legislatures have responded over the years with numerous targeted tax incentives, many of which have only been available for a short period of time, to encourage consumer, business and utility investment in alternative energy technologies.   Although the success of such incentives is difficult to evaluate empirically, some scholars have concluded that incentives targeted at consumers are poorly coordinated and fall short of achieving the hoped-for benefits.  One question, however, is whether targeting tax incentives of this kind at individual consumers is likely to be an efficient approach under any circumstances and, if so, when.

This article, taking wind power technologies as an example, considers how tax incentives to encourage investment in wind turbines and related technology might be targeted, at individual consumers, at businesses, at manufacturers of the wind turbines and related equipment, and at power generators, such as the electric power utilities.  The American Council for an Energy-Efficient Economy has spelled out eight criteria for tax incentives designed to encourage energy efficiency, all of which are useful in thinking about the design of renewable energy incentives.  These criteria, however, only indirectly address who the incentives should target.  Indeed, one criterion is being flexible about whether the benefit should go to the manufacturer or the consumer. 

This article goes one step further, to provide a framework for evaluating the advantages and disadvantages of targeting such incentives at each category of targets in light of numerous more pragmatic criteria, such as lost revenue cost, administrability, ease of communicating and advertising the benefit to a substantial percentage of the targets in the category through the tax system, availability of other efficient ways to promote the incentives (especially those that would not require substantial costs),  likelihood of affecting a decision by the targets to invest in the new technology, and transition costs, such the accelerated obsolescence and junking of existing equipment. This approach may help policymakers move away from political decisions about how to target tax incentive benefits toward decisions to target incentives to invest in renewable energy sources in ways that will yield the largest net benefit for the revenue cost incurred.


Tax incentives for ocean wave energy

Prof. Hans Sprohge, Wright State University, Prof. Larry Kreiser, Cleveland State University, USA;
Bill Butcher, University of New South Wales, Australia;
Dr. Julsuchada Sirisom, Mahasarakham University, Thailand

An ocean wave is a movement of energy which can be captured and converted into electricity.  It is estimated that ocean wave energy can be as large a source of renewable energy as wind power. It can also be a major source of employment in rural areas.  Ocean wave energy, however, is a new technology which will need incentives to encourage investor interest in the area and to foster technological development.

In this paper, the authors review the various incentive programs, including tax incentives, which are available at the Federal and state levels in the United States for the development of ocean wave energy technology. In addition, the authors propose new Federal tax incentives which might be considered in this area.


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