Energy and climate hand-in-hand: Financing RES-E support with carbon revenues

Stefano Verde () and Maria Grazia Pazienza

Energy Policy, 2016, vol. 88, issue C, 234-244

Abstract: In Italy, the cost of support for renewable electricity (RES-E) is largely recovered through the “A3 surcharge”, which weighs heavily on electricity bills. Using household survey data, we show the A3 surcharge is markedly regressive. Carbon taxation in the non-ETS sector is envisaged as a means to reduce CO2 emissions cost-effectively and generate revenue to lower the A3 surcharge. A non-ETS carbon tax would be less regressive than the A3 surcharge and its cost would be more evenly distributed across households. We calculate the revenue of a €20/tCO2 non-ETS carbon tax would have allowed a cut in the A3 surcharge of about 68% in 2011, and 39% in 2012. The impact of the carbon tax plus the reduced A3 surcharge would have been less regressive, but the cost higher for most households. The restrictions imposed in the simulations mean the results are only appropriate to render first-round effects of the reform.

Keywords: Financing RES-E support; RES-E surcharges; Carbon tax; Non-ETS sector; Distributional effects; Energy consumption patterns (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:88:y:2016:i:c:p:234-244

DOI: 10.1016/j.enpol.2015.10.013

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