Academic journal article International Journal of Business and Society

The Role of Fiscal Incentives for Renewable Energy on Economic Growth

Academic journal article International Journal of Business and Society

The Role of Fiscal Incentives for Renewable Energy on Economic Growth

Article excerpt

1.INTRODUCTION

Renewable energy1 is at the core of the European Union 'environmental policy. Europe has committed to become a highly energy-efficient, low carbon economy by 2020, reducing by 20% EU greenhouse gas emissions from 1990 levels, raising the share of EU energy consumption produced from renewable resources to 20% and improving by 20% the EU's energy efficiency. Under the Renewable Energy Directive (Directive 2009/28/CE), Member States have established national targets to reach these goals. Italy committed to attain 17% of energy from renewable sources. While heavily relying on energy import (84% of Italy's energy needs), Italy has reached high environmental standard, by being one of the world's most energy-efficient countries (with primary energy intensity 14% lower than the European average in 2010). Domestic production from renewables covers 10% of the national demand (Ministero dello Sviluppo Economico 2013, p.18).

A wide array of measures is in place to improve energy efficiency and promote renewable energy sources (e.g. white certificates, requirements for buildings). After careful consideration of the instruments promoting renewable energy, but also generating market distortion (e.g. fixed tariffs), the European Commission is pushing forward greater integration of renewable energy into the market, through competitive bidding procedures, which will concern grants to support all the new installations from 2017(EC 2014).

Energy is one of the subjects of the "European Cohesion Policy", which supports the shift towards a lowcarbon economy. Cohesion Policy Funds are a crucial tool for helping Member States to achieve Europe 2020 objectives, by promoting investments for increasing the use of renewable energy; decreasing energy use; promoting smart energy systems and encouraging an integrated approach to policy-making and implementation2: The Italian Government establishes grants for supporting renewable energy, linked to enhancing the innovation, development or revitalization of entrepreneurship. Funds for national calls for tender are in the general budget of line ministries and allocated according to established criteria, upon the availability of funds.

The Renewable Energy Directive (Directive 2009/28/CE) states that when favouring the development of the market for renewable energy sources, it is necessary to take into account the positive impact on regional and local development opportunities, export prospects, social cohesion and employment opportunities (p.2). Despite the relevance of the subject, several scholars (see next paragraph) highlight the lack of empirical evidences in the field, which encourage further research.

By analyzing 84 calls for tenders for allocating funds to promote the use of renewable energy sources and energy efficiency in the years 2008-2014, the paper sheds light on the efficiency in the use of funds and their effectiveness in reaching pre-defined objectives at regional level.

The paper is structured as follows. Section 2 will provide a description of the role of incentives and renewable energy on economic development; Section 3 describes data and methodology, while Section 4 will offer concluding comments.

2.THE ROLE OF INCENTIVES AND RENEWABLE ENERGY ON ECONOMIC DEVELOPMENT

Energy is the engine of global economic development, as it contributes to improve people well - being and quality of life. In truth, energy availability and use conditions affect the competitiveness of production systems. Thus, energy may be treated as a feature of economic and social dimension of the development (Teraoui et al. 2011; Cowan et al., 2014; Baranzini et al., 2013).

When it comes to renewable energy, different studies have analyzed the impacts of renewable energy on rural communities (El Bassam and Maegaard, 2004), local development (Reddy, Uitto, Frans, Matin, 2006), employment (Kammen et al. 2004, Heavner, del Chiaro, 2003, Hillebrand et al. 2006), economic and social dimensions of sustainable development (Bhattacharya et al. …

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