This category constitutes policies which are focused on cost reductions and improvement of the relative competitiveness of RE Technologies in given markets: capital grants, third-party finance, investment tax credits, property tax exemptions, production tax credits, sales tax rebates, excise tax exemptions, etc. Some of these measures can be well applied to RET invested by the users themselves. Taxes on fossil fuels also improve the competitive position of renewable energy and are particularly appropriate to internalize negative external effects on environmental or energy security.
Specific regulatory policy instruments are:
- Capital subsidy, grant, or rebate
This group of fiscal policy types is characterized by one-time payments by the government to cover a percentage of the capital cost of an investment.
All tax incentives are included in this category of fiscal policies, in particular investment tax credits, production tax credits or reductions in sales, energy, carbon, excise, VAT, etc.
As a sub-category investment/production tax credits provide the investor or owner of qualifying property with an annual income tax credit based on the amount of money invested in that facility or the amount of electricity that it generates during the relevant year. It allows investments in RE to be fully or partially deducted from tax obligations or income. Reductions in sales, VAT, energy or other taxes as another sub-group have in common a reduction in taxes which is applicable to the purchase (or production) of renewable energy technologies.
- Energy production payment
This is defined as a direct payment of the government per unit of renewable energy produced.