Analysis of tax incentives for energy-efficient durables in the EU

Climate change is one of the most significant challenges faced by societies this century. Energy consumption is directly associated with CO2 emissions and climate change. The European Commission has set out emission reduction targets that require a great deal of energy consumption savings in the next 10 years in European countries. This paper presents the results of an analysis of the potential cost-effectiveness of different policy options aimed to foster the production and consumption of energy-efficient appliances in different European countries. Our results suggest that incentives to promote the use of energy-efficient appliances can be cost-effective, but whether or not they are depends on the particular country and the options under consideration. From the cases considered, tax credits on boilers appear to be a cost-effective option in Denmark and Italy, while subsidies on CFLi bulbs in France and Poland are cost-effective in terms of €/ton of CO2 abated. Comparing the subsidies against the energy tax options, we find that the subsidies are in most cases less cost-effective than the energy tax.