Energy taxation exemptions for energy intensive industries and its impact on energy efficiency in Latvia

Abstract

Energy efficiency is one of the most important tools for EU climate policy, and European Union Directive also imposes binding obligations on Member States for its implementation. Energy efficiency is also one of the ways how energy-intensive manufacturing companies could overcome the rising costs of energy, driven by ambitious climate policy. In Latvia, energy efficiency policy goes along with energy-intensive consumer rights on energy taxation exemptions that should ensure their competitiveness. However, both policies are in some way contradictory and, in certain circumstances, when an energy-intensive company faces the risk to lose its status of being energy-intensive company, energy efficiency policy will fail as the company's willingness to become more efficient will be reduced. However, the peculiarities of the Latvian tax policy, whereby the right to receive the tax rebate is not available at the moment of consumption but post-factum, which does not provide full sustainability, may weaken company's willingness to maintain energy intensity above the threshold and provide tax refunds as an additional source to finance energy efficiency measures.