Increasing the share of renewable energy sources (RESs) in the specific portfolio by using the taxation mechanism: Study at the level of EU states

Abstract

In recent years, a major concern of countries around the world has been to reduce pollution through various environmental policies, and the current geopolitical context requires the European Union to focus increasingly on reducing dependence on fossil fuels and using green energy sources. Starting from this specific and significant issue to be considered by policy makers for energy efficiency, this study aims to empirically assess the influence of energy taxation as an environmental policy measure on the development of renewable energy sources (RESs) and their increasing share in the energy portfolio. The study covers 28 countries that are members of the European Union and refers to the analysis period 2004–2021.The data used are panel data from the Eurostat database and the methods proposed for the empirical research refer to long-run A.R.D.L. (Auto Regressive Distributed Lag) models for estimating non-stationary heterogeneous panels with cross-sectional dependence. In addition to energy taxes (total and household) and the share of renewables included as variables of interest in the model, in order to test the robustness of the results obtained, control variables used in similar works, such as gross domestic product, population density and imports, were also included. The findings suggest that higher energy taxes lead to an increased share of RESs, highlighting the need for policymakers to incentivize energy efficiency through tax policies. Thus, the paper addresses an important and timely issue, given the current geopolitical context and the global push towards sustainable energy sources.