Efficiency of Energy Taxes and the Validity of the Residential Electricity Environmental Kuznets Curve in the European Union

Abstract

To achieve the energy targets, energy policy of the European Union (EU) is trying to discourage residential electricity consumption employing different measures but without worsening the quality of life and jeopardizing its economic growth and development at the same time. This paper aims to directly and indirectly explore the effects of energy taxes on household electricity consumption and test the validity of the household electricity environmental Kuznets curve (EEKC) in a multivariate setting and a system generalized method of moments framework for EU member countries in the period 2005-2016. The results reveal that energy taxes influence electricity consumption more efficiently through energy prices than directly and in the long-run. Efficiency of energy taxes can be reinforced by combining changes in energy prices and policy measures that change the electricity consumption behavior patterns. As for the EEKC, the paper corroborates its inverted U-shaped form, assuming thereby at least the same level of policy efforts directed to accomplish the energy targets and household willingness to use goods in an environmentally friendly way.

Exploring the Role of Carbon Taxation Policies on CO2 Emissions: Contextual Evidence from Tax Implementation and Non-Implementation European Countries

“…The empirical results claimed that imposed carbon-tax might reduce the emissions level by 1% with respect to the forcasted period 2014 to 2024. For the case of European countries, Borozan [25] claimed that the energy related taxes signficantly affect the electricty use more efficiently by affecting the energy prices directly and indirectly.…”

The Contribution of Energy Taxes to Climate Change Policy in the European Union (EU)

“…AT, BE, BG, HR, CZ (2) , DE, EE, FI, FR, DE, EL, HU, IE, LV, LU, MT, NL, PL, PT, RO, SK, SI, ES, SE, UK CY (4) , IT (3) LT (1)(3) AT, BE, BG, HR, CZ, DE, EE, FI, FR (2) , DE, EL, HU, IE, LV, LT, LU, MT, NL, PL, PT, RO, SK, SI, SE, UK CY (4) , IT AT, BE, BG, HR, CY, CZ, DE, EE, FI, DE, EL, IE, IT, LV, LU, MT, NL, PL, PT, RO (2) , SK, SI, SE, UK HU (1)(4) , LT (4) , FR MT (4) , SE (1) 3IT (1)(4) AT, BE, BG, HR, CY, CZ, DE, EE, FI, FR, DE, EL, HU, IE (2) , LV, LU, NL, PL, PT, RO, SK, SI, SE, UK LT (4) , MT (1) 4IT 1 In the case of Granger causality between energy taxes and renewable energy consumption, we found weak statistical evidence of a negative correlation between taxes and renewable energy in Hungary (with both types of models used for estimation). Meanwhile, in Lithuania, we found strong and in France weak and positive evidence (just with the log-log type of the model) that showed that in these countries, an increase in energy taxes Granger-caused an increase in renewable energy consumption.…”

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“…Increasing the prices of goods and services pushes consumers to change their purchasing behaviors, reducing demand for the products and services of polluters [8]. Furthermore, environmental taxes influence GHG emissions [3] by generating governmental income, which can be directed toward solving environmental issues and motivating taxpayers to improve production for social or economic purposes. Energy taxes (defined as environmental taxes levied on energy products and on the production and consumption of energy) and carbon taxes (taxes levied on the burning of carbon-based fuels (coal, oil, gas)) are the market-based initiatives applied the most toward reducing the impact of climate change.…”

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“…By contrast, implementing specific government programs will decrease it. For example, the share of energy tax revenues in GDP turns out to be negative and significant in the BMA settings, meaning that an energy tax is an effective policy tool for influencing industrial energy consumption directly in contrast to the residential sector [44]. Evidently, since an energy tax increases business costs, it motivates them to reduce energy consumption, improve energy efficiency, and use more cleaner and greener energy and sustainable practices.…”