EU Policies and Regulation on CO2, Renewables and Energy Efficiency: A Critical Assessment of Recent Experiences - Green Energy and Efficiency: An Economic Perspective - page 31

European Commission 20 targets, the government has often mixed up

the concepts of regulation and taxation, overlooking the indispensable complemen-
tarity between the two, and thus creating an uncoordinated system as far as envi-
ronmental and energy legislation is concerned. Therefore, the current tax structure is
not effective in addressing the challenges faced by the Spanish energy model, which
requires strong incentives in favour of those technologies which are most ef

' s recent 20 20

- -

cient and
have least environmental impact, and a stable framework to regulate activity
regardless of regional preferences, so as to avoid pseudo-environmental taxation.
Moreover, ad valorem taxes and subsidies on fossil fuels, or on the list of prices
applicable to the various energy products, fail to comply with the optimal

scal design

principles set out at the beginning of this chapter as they do not re ect the actual

damage produced by each energy source. The main challenge faced by regulators in
Spain as regards matters of taxation is thus precisely how to establish a taxation
framework that is capable of guaranteeing the long-term sustainability (in the broadest
sense of the word) of our system.

4 Supporting Frameworks for Renewable Energies

4.1 Existing Supporting Frameworks for Renewable
Energies

Directive [ 9 ] 2001/77/EC on Renewable Energies marked one of the rst mile-
stones in the promotion of renewable energies in the EU. The Directive was based
on the 1997 White Paper on Renewable Energy Sources, which set a target of
having renewable energies account for 12 % of the gross energy consumption in
EU-15 by 2010 and the electricity generated from those renewable sources account
for 22.1 %. The 2001 Directive gave the Member States total freedom to establish
their own supporting frameworks. Therefore, the EU has basically committed to a
combination of an indirect method

, the EU ETS, which penalises generation
facilities that produce CO 2 emissions compared to those that do not

—

with direct
methods at national level. Direct methods are dependent on the fact that the indirect
method is insuf

—

cient to guarantee the competitiveness of using renewable rather
than conventional energies. There are various different types of direct method.
These supporting systems can function by regulating the sale price of the
electricity generated from renewable sources, either by introducing a

scal or

t per kW of installed capacity, or by deciding in full or in part what
tariffs must be paid for each kWh generated and uploaded to the grid from a
renewable source. In both cases, the market is accountable for the result in terms of
the capacity to be installed. In other cases, the supporting framework is based on
establishing a target power or generation level to be reached, in absolute or relative
terms, and letting the market decide the price payable to generators for the
renewable energy produced (Table 1 ).

nancial bene