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Implication of electricity taxes and levies on sustainable development goals in the European Union

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  • Karimu, Amin
  • Bali Swain, Ranjula

Abstract

The current high electricity prices in the European Union (EU) are in part due to the high electricity taxes. United Nations’ Sustainable Development Goals (SDGs) Agenda with its global vision of attaining sustainable development especially seeks “to ensure universal access to affordable, reliable and modern energy services” (SDG 7). We investigate the synergy and trade-off effects of electricity taxes on sustainable development goals (SDGs) for the EU. Using panel data and panel vector autoregressive estimation approach, we find that higher household electricity taxes reduce both carbon emission and unemployment. Higher levels of industry electricity taxes, increase responsible production and consumption (SDG12) and reduces unemployment (SDG8). Furthermore, there is evidence for a strong synergy effect between electricity taxes, unemployment and carbon emission but a trade-off between tax and SDG9 (innovation and sustainable infrastructure). The taxes contribute more to the future variation of unemployment and responsible production and consumption in the EU, but these contributions are much larger for the industry as compared to the household sector. Our results confirm the double-dividend hypothesis, which implies that the policymakers can achieve environmental goals with higher electricity taxes, especially on household electricity. In the industrial sector, our findings suggest that there is a need for tax reform, to encourage innovation and adopt production processes that are less polluting to the environment.

Suggested Citation

  • Karimu, Amin & Bali Swain, Ranjula, 2023. "Implication of electricity taxes and levies on sustainable development goals in the European Union," Energy Policy, Elsevier, vol. 177(C).
    • Handle: RePEc:eee:enepol:v:177:y:2023:i:c:s0301421523001386
    DOI: 10.1016/j.enpol.2023.113553
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    More about this item

    Keywords

    Electricity; EU; Household; Industry; Tax; Sustainable development goals;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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