Info

Power Efficiency Guide

Ultimate Guide to Power Efficiency

Get Instant Access

' NF/UNEP/World Bank, 2004. ** The Jordan Institute, 2010. 1 Energy Programs Consortium, 1999. Source: IEA, 2010.

' NF/UNEP/World Bank, 2004. ** The Jordan Institute, 2010. 1 Energy Programs Consortium, 1999. Source: IEA, 2010.

SPBC schemes in California, New York, and Massachusetts have successfully created a multiplier effect in overall energy efficiency investment, i.e., the sum of public benefits spending, private investment, and government spending (Nadal and Kushler, 2000). System public benefit charges raise large amounts of funds at only a small cost to the individual customer, with the receipts then disbursed via popular programmes that affected customers can access.

Critics of SPBC schemes argue they are a tax on utility ratepayers that is used to cross-subsidise inefficient rebate programmes beneficial only to a few (Switzer, 2002). However, SPBC schemes have many more proponents than critics. This may be due to the nature of SPBCs: relatively large amounts of funds are raised at only a small cost to the individual customer, with the receipts then disbursed via popular programmes that the affected customers can access themselves. The criticisms raised relate more to how the funds are used than to the collection mechanism itself. There is nonetheless potential for inefficiencies in SPBC schemes, including free-riding, market distortion, rebound effect, technology lock-in, and cost-ineffectiveness (Khawaja, Koss and Hedman, 2001). One may also question whether the monies would not be better collected by governments via an equivalent energy tax, and then used in reducing labour taxes and social charges as per the general recommendation for energy and environmental taxes.

Earmarked energy and environmental taxes

Fiscal policy is a powerful tool used by governments to influence consumer consumption and investment. Fiscal policies can be used to both promote energy conservation and penalise energy consumption. Taxes levied on fuel consumption or emissions from household or economic activity - energy and environmental taxes - adjust the relative prices of energy inputs and emissions output to influence consumers' energy consumption.

Environmental taxation accounts for an average of around 2% of GDP in OECD member countries, although this share has recently decreased (Figure 1).

How to use the revenues generated by energy or environmental taxes is a separate fiscal policy question. Earmarking is the hypothecation of some or all of the tax revenues for specific purposes, e.g., energy efficiency or technology innovation. Recent reports by the OECD recommend against earmarking, arguing that governments should "use the proceeds [of environmental taxes] to augment general government spending in other areas, maintain spending levels, reduce debt or reduce other taxes" - especially during times of financial crisis (OECD, 2010). In general, the view of classical economists is that earmarking of environmental taxes reduces economic efficiency by creating distortions in the marketplace, as governments place confidence in the wrong technologies or over-invest in some forms of energy efficiency just because the funds are available.

Political economists, however, expect opposition to any new tax, and therefore view the channelling of tax revenues back to affected sectors through earmarking as a way to increase public acceptance of energy taxes. Some schemes, such as the French bonus-malus (i.e. feebate-rebate) scheme, build on the political advantages of links between energy consumption and government support.

Was this article helpful?

0 0

Post a comment