Fiscal Policy for Decarbonisation of Energy in Europe, with a Focus on Urban Transport: Case Study and Proposal for Spain

In this paper, we argue that fiscal policy in Europe is not aligned with decarbonisation and propose reforms to improve the alignment. We also report on a case study carried out to model the impact of implementing a version of the proposed fiscal reform in Spain. That case study illustrates that this fiscal reform is valuable, in particular to reduce CO2 emissions. However, it also reveals the need for a transition plan to send investment signals and to deal with the political economy frictions that exist when new technologies are being introduced, especially in the transport sector.

By: David Robinson , Pedro Linares