Energy Mix and Energy Taxation: A Comparison between the EU, Italy and Turkey

Year 2014, Volume: 19 Issue: 3, 81 - 100, 01.10.2014

Rossella Bardazzı Maria Grazia Pazıenza

Abstract

Recent years have seen increasing worldwide attention being paid to the broad issue of energy and, in particular, to the aspect of energy security. The issue is even more crucial in Europe and Turkey, which are both energy dependent and are trying to diversify their strategies in order to secure energy availability and to moderate energy price increases. This paper aims to highlight similarities and differences between the European and Turkish energy frameworks and related energy policies, with a special focus on energy taxation. Among the EU countries, particular attention is paid to Italy, whose degree of energy dependency and use of energy taxation are among the highest in Europe. We argue that the use of market-based instruments such as energy taxes is an effective tool for policymakers to influence consumers’ energy consumption and change the energy mix towards less polluting and domestically produced fuels

Keywords

Market-based instruments, energy taxation, decoupling, energy uses, energy demand elasticities.

References

• European Commission, European Energy Security Strategy, Communication of the European Commission, COM (2014) 330 final, 2014.
• Christian Winzer, “Conceptualizing Energy Security”, Energy Policy, Vol. 46 (2012), pp. 36-48.
• André Månsson, Bengt Johansson, and Lars J.Nilsson, “Assessing Energy Security: An Overview of Commonly Used Methodologies”, Energy, Vol. 73 (2014), pp. 1-14.
• European Commission, A Policy Framework for Climate and Energy in the Period from 2020 to 2030, COM(2014) 15 final, 2014.
• European Commission, A Sustainable Europe for a Better World: A European Union Strategy for Sustainable Development, COM(2001)264 final, 2001; European Commission, On the review of the Sustainable Development Strategy. A platform for action, COM (2005) 658 final, 2005.
• European Commission, “Member States’ Energy Dependence: An Indicator-Based Assessment”, European Economy Occasional Papers, No. 145 (2013). 7 Two countries with high import shares can differ, as vulnerability depends on the geopolitical risk of supply partners and on the actual use of imported energy.
• Energy intensity, in particular, measures the amount of energy (tonnes of oil equivalent, or TOE) each country needs to generate a unit of gross domestic product (GDP), whereas energy divided by the country population represents per capita energy consumption.
• For the use of other market-based instruments in Turkey, see Ozge Kama, Zeynep Kaplan, “Energy Efficiency Policies in Turkey: The Case for Standards and Labels”, International Journal of Energy Economics and Policy, Vol. 3, Special Issue (2013), pp. 62-73.
• Izak Atiyas, Tamer Çetin, Gurcan Gulen, Reforming Turkish Energy Markets, New York, Springer, 2012.
• As the quantity used is the energy tax base, the rectangle in grey is the tax revenue coming from each product for different uses.
• For the distributional impact, see, Zhang for Turkey and Miniaci et al. for Italy. Fan Zhang, “Distributional Impact Analysis of the Energy Price Reform in Turkey”, World Bank Working Paper, (2012), DOI: 10.1596/1813-9450-5831; Raffaele Miniaci, Carlo Scarpa and Paola Valbonesi, “Distributional Effects of Price Reforms in the Italian Utility Markets”, Fiscal Studies, Vol. 29, No. 1 (2008), pp, 135-163.
• The Roadmap for moving to a competitive low carbon economy in 2050 includes a push towards the electrification of the transport sector. See, European Commission, COM/2011/0112 final. 15 Ibid.
• Vincenzo Bianco, Oronzio Manca and Sergio Nardini, “Electricity consumption forecasting in Italy using linear regression models”, Energy, Vol. 34 (2009), pp. 1413- 1421.
• Rossella Bardazzi, Filippo Oropallo and Maria Grazia Pazienza, “Is it Time for a Revival of ETR in Italy? Energy Elasticities and Factor Substitutability for Manufacturing Firms”, Rivista di Politica Economica, July- September (2009), pp, 205-240; Juan Medina and Juan A. Vega-Cervera, “Energy and the Non-energy Inputs Substitution: Evidence for Italy, Portugal and Spain”, Applied Energy, No. 68 (2001), pp. 203- 214.
• See the survey by Stern. David I. Stern, “Interfuel Substitution: A Meta- aAnalysis”, Journal of Economic Surveys, Vol. 26, No. 2 (2012), pp. 307- 331.
• Rossella Bardazzi, Filippo Oropallo, Maria Grazia Pazienza, Firms’ energy demand and the role of energy taxes: Elasticities estimation of industrial firms in Italy, Proceedings of the 9th International Conference on the European Energy Market, European University, 2012, pp. 1-8.
• Erkan Erdoğdu, “Natural Gas Demand in Turkey” Applied Energy, Vol. 87, No. 1 (2010), pp. 211-219.
• Zafer Dilaver and and Lester C. Hunt, “Industrial Electricity Demand for Turkey: A Structural Time Series Analysis”, Energy Economics, Vol. 33, No. 3 (2011), pp. 426- 436.
• In previous studies, Halıcıoğlu (2007) found short- and long-run price elasticities of residential electricity demand of -0.33 and -0.52 respectively, whereas Erdoğdu (2007) found the long-run price elasticity of total electricity demand to be -0.30. Erkan Erdoğdu, “Electricity Demand Analysis Using Cointegration and ARIMA Modelling: A Case Study of Turkey”, Energy Policy, Vol. 35, No. 2 (2007), pp. 1129-1146; Ferda Halicioglu, “Residential Electricity Demand Dynamics in Turkey”, Energy Economics, Vol. 29, No. 2 (2007), pp. 199-210.
• Zafer Dilaver and Lester C.Hunt, “Modelling and Forecasting Turkish Residential Electricity Demand”, Energy Policy, Vol. 39, No. 6 (2011), pp. 3117-3127.
• Apostolos Serletis, Govinda.R. Timilsina, Olexandr Vasetsky O., “International Evidence on Sectoral Interfuel Substitution”, The Energy Journal, Vol. 31, No. 4 (2009), pp. 1-29.
• Yusuf Akan and Cuma Bozkurt, “ Economic Growth, CO2 Emissions and Energy Consumptions: Turkish Case”, International Journal of Energy Economics and Policy, Vol. 4, No. 3 (2014), pp. 484-494.