Applying Energy Taxes to Promote a Clean, Sustainable and Secure Energy System: Finding the Preferable Approaches

Abstract

The growing importance of climate change and the depletion of natural resources, as well as geopolitical risks associated with the distribution of energy resources, cause an increase in the urgency of ensuring energy security. In modern conditions, the criteria of energy security are the level of production of traditional and renewable energy, the efficiency of energy production, the rationality of its consumption, and the level of pollution arising in the process of the functioning of the energy sector. Different types of regulatory instruments are used internationally to achieve different goals related to energy security. This study involves testing the hypothesis that the effectiveness of energy taxes in ensuring energy security is determined based on the choice of the object of taxation and should be measured via the complex effect of changes in various parameters of energy security. To test this hypothesis, a sample of data from 24 European countries for the period 1994–2020 was formed and energy taxes were grouped into 12 groups (energy taxes on the consumption of different energy sources, energy taxes on fossil fuels, taxes on electricity consumption, taxes to stimulate renewable energy production, contributions to energy funds, etc.). The assessment was carried out with the help of panel regression modeling tools with the installation of a three-year time lag in the model. This method made it possible to determine the short- and medium-term effects of the regulatory influence of certain types of energy taxes. Moreover, the research provides an assessment of the regulatory effectiveness of various types of energy taxes across countries with different initial structures of energy production. The obtained results proved that the comprehensive efficiency of different types of energy taxes is different and depends on the features of the construction of the country’s energy system. In general, complex energy taxes are the most effective method of taxation, while contributions to energy funds are the least effective method of taxation. In the countries with energy systems based on fossil fuels, taxes on mineral oils are the most effective in ensuring of energy security, as well as in the countries with a high initial level of renewable energy use, while complex energy taxes are the most effective in the countries with well-diversified energy systems. This study creates the basis for improving strategies for the use of regulatory instruments of energy transformation in building a clean, secure, and sustainable energy system for the country.