Impact evaluation of financing mechanisms for renewable energy in Spain

Abstract

This article analyzes the economic, social and environmental impact of various financing mechanisms for the regulated costs of renewable energies in the electricity sector (RECORE) in
Spain. The scenarios analysed, alternative to the current system, in which the costs are transferred in full to the electricity bill of final consumers, are the following: financing through the General State Budgets (PGE scenario), financing through a tax proportional to final energy consumption (Energy scenario) and financed through a CO2 tax in diffuse sectors (CO2 scenario). The study uses a computable general equilibrium (CGE) model and a micro simulation model that includes detailed information on the 22,000 households included in the Household Budget Survey. The results show that the impact at the macroeconomic level is positive but very small for all the scenarios analyzed and that the changes at the sectoral level or in emissions depend notably on the scenario. All the scenarios favor low-income households since their spending on electricity
represents a relatively higher percentage of their income. Although no alternative is better in all the dimensions analyzed, taxes on energy or CO2 favor the energy transition, while the PGE alternative generates more progressive distributional effects.

Keywords:

public policy evaluation, energy, climate change

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