Well-designed fiscal incentives and regulations can accelerate the transition to electric /other zeroemission vehicles and increase building efficiency, Trend reports with reference to the International Monetary Fund (IMF).
“The transportation and building sectors are less responsive to emissions pricing than power and industry. Additionally, the necessary emissions cutback would be difficult to achieve through pricing alone, as the needed carbon prices would be unrealistically high. Therefore, fiscal incentives and regulations have an especially important reinforcing role in this regard, complementing carbon pricing. For example, many European countries include elements of feebates in their vehicle tax systems and those systems with the strongest incentives, have been the most successful in deploying electric vehicles. These incentives could play a pivotal role as countries implement pledges to phase out internal combustion engine vehicles. In the building sector, new buildings can be subject to stricter emissions requirements; real estate taxes can be linked to the energy rating of the building to encourage retrofits; and feebates and regulations can promote electrification and the adoption of energy-efficient appliances,” reads the latest IMF report.
The report reveals that public investments in enabling infrastructure, connectivity, and measures to advance critical technologies—as envisaged in the RePowerEU plan—will be key to achieving both decarbonization and energy security in Europe.
“Public investment in clean technology infrastructure networks that would not be provided by the private sector (even with high carbon prices) is needed. This could include high-voltage smart grids to accommodate renewables, electric vehicle charging stations, and pipelines for green hydrogen. Improving connectivity within and between countries can help achieve a more stable and diversified supply of energy from renewable sources. Finally, public support is needed for developing critical technologies (e.g., energy storage, carbon capture and storage, direct air capture) and bringing these technologies to the market.”